[ Last Updated 18 December 2008 ]
Short Description
Syndicated Procurement Models
Are government agencies required to use syndicated procurement arrangements?
No. Agency participation in syndicated procurement is voluntary.
How do agencies collaborate using a common use provision (CUP) model?
A "Lead Agency", or group of agencies, runs the tender process in accordance with government procurement policies and guidelines and includes a Common Use Provision ("CUP" or "piggy back" clause) in tender and contract documents to provide for potentially wider use.
The CUP enables eligible agencies to join the contract at any time during the life of the contract for the remaining balance of the contract term (ie joining agencies do not have to participate in the up-front tender and selection process to access the benefits of the syndicated arrangement).
How do agencies collaborate using a cluster model?
In this model a group of agencies collaborate before going to the market and approach the market collectively (ie aggregate their requirements). Other agencies cannot subsequently join the (closed) arrangement, unless the contract also contains a common use provision (CUP).
The extent of collaboration between participating agencies varies depending on the circumstances and complexity of the procurement. At one end of the spectrum, there is a detailed consultation process between all cluster participants to develop joint tender documents and select a preferred vendor. In contrast, the cluster may appoint a particular agency(s) to coordinate and manage the process with limited consultation or input from cluster participants.
Can a cluster contract include a CUP?
Yes, where the conditions for including a Common Use Provision in a contract are met, a group or cluster of agencies can negotiate a contract and include a CUP to enable other agencies to join at a later date.
Does a cluster contract containing a CUP need to be reviewed and endorsed?
Yes, the conditions for including a Common Use Provision apply to all contractual arrangements.
Syndicated contracts review and endorsement process
Why has a syndicated contract review and endorsement process been introduced?
The review and endorsement process has been introduced to:
- protect the value of the CUP model by ensuring it is used only when appropriate;
- provide greater assurance that CUP contracts are established using a robust procurement process;
- increase the value of endorsed CUP contracts in the market: and
- encourage greater collaboration in government procurement.
Under what authority has the syndicated contract review and endorsement process been introduced?
On 21 May 2007, Cabinet agreed that syndicated procurement contracts and clauses be subject to review and endorsement. (CAB Min (07) 17/2B)
Which syndicated arrangements are subject to the syndicated contracts review and endorsement process?
Syndicated arrangements that use a Common Use Provision (CUP).
Will syndicated CUP contracts established before the syndicated contracts review and endorsement process came into force be endorsed?
Only those that are reviewed within transition timeframes and achieve subsequent endorsement. Applications for review of existing CUP contracts must be made to procurement@med.govt.nz by 1 November 2007. Evidence to support applications must be lodged with the Government Development Group of MED within three months of the initiation of the contract review. Existing CUP contracts are not guaranteed to achieve endorsement.
Who will undertake syndicated contract reviews?
Cabinet agreed that the syndicated contract review and endorsement process is the responsibility of the interdepartmental Procurement Advisory Board (PAG), in consultation with the Ministry of Economic Development (CAB Min (07) 17/2B).
A sub-grouping of PAG, to be known as the Syndicated Contracts Review Board, will undertake reviews on behalf of PAG in accordance with the Terms of Reference for Syndicated Contract Reviews. The Board will include a representative from MED's Government Procurement Development Group. The Board may bring in non-PAG members when required to provide specialist advice or expertise.
How will syndicated contract reviews be carried out?
The review process has been summarised in a flow chart. For a detailed explanation of the process, see the Terms of Reference for Syndicated Contracts Review and Endorsement.
Will the syndicated review and endorsement process deter agencies from leading syndicated contracts?
The review process is designed to provide assurance that a robust procurement process is being used. Agencies with mature procurement capability should not find a review onerous, as ensuring a sound procurement process is being followed should be part of their business as usual activity.
For agencies with less mature procurement capability, a review may present some challenges. Agencies daunted by the need to undergo a review should keep in mind that the Syndicated Contracts Review Board is expected to treat the process as a learning experience, rather than a compliance activity. The Board will offer advice and opportunities for improvement at each successive stage of the review process. Except as provided for under transition arrangements for existing CUP contracts, the Board will not publicise details of unsuccessful applications.
Can endorsement be revoked?
Yes. CUP contract endorsement can be revoked if necessary to protect the value of the CUP syndicated procurement model and all-of-government interests (eg to prevent significant market distortion or in response to successful judicial review or other legal/procedural challenges).
CUP contracts
Which agencies are eligible to join CUP contracts?
Public Service departments; Non-Public Service departments; Crown entities (with the exception of School Boards of Trustees); Public Finance Act Fourth Schedule Organisations; the Reserve Bank of New Zealand; Offices of Parliament; State-owned enterprises; and Local Authorities are eligible to join syndicated CUP contracts, subject to supplier(s) and Lead Agency agreement. Subsidiaries and other types of agencies may be considered for eligibility on a case-by-case basis by the Lead Agency and supplier, in consultation with MED.
Do the open tendering requirements of the Mandatory Rules for Procurement by Departments preclude agencies from joining CUP contracts?
No. The Rules allow agencies to join endorsed CUP contracts (refer to footnote 8 of the Rules).
Can an agency that negotiates a favourable deal insert a CUP clause in their contract with the supplier for the benefit of other agencies?
No, because all tender advertisements and documents must clearly state that a CUP will be included in any subsequent contract, subject to endorsement (and agencies must have prior approval to approach the market with a CUP opportunity).
Who is responsible for managing the CUP contract?
The Lead Agency is responsible for the contract management of the Master Agreement, including any market benchmarking, review negotiation and subsequent price roll out to participating agencies during the term of the contract, and deciding whether to exercise provisions for extending the contract for any additional terms provided for in the Master Agreement.
The level of contract management and engagement with participating agencies over the life of the contract should be set out in the Lead Agency's contract management plan.
Note that the Lead Agency is not responsible for managing the contractual relationship between the supplier and any other participating agencies.
Who is responsible for undertaking contract reviews?
The Lead Agency is responsible for reviews and negotiations relating to the Master Agreement.
Participating agencies have a responsibility for ensuring that they review their individual service level agreement with the supplier. Participating agencies should also consider whether the contract continues to meet their needs and provide value for money for their agency in advance of Lead Agency decisions on exercising options for extending the contract for additional terms, where these are provided for under the contract.
Where a contract review undertaken by the Lead Agency results in pricing or other changes to the Master Agreement, do these apply to all participants?
Yes. The Lead Agency is responsible for ensuring participants are advised of the outcome of CUP contract reviews and variations.
Whose decision is it to extend the arrangement for additional terms?
The Lead Agency decides whether or not the arrangement should be extended for any additional terms provided for under the Master Agreement.
The Lead Agency is responsible for ensuring participants are made aware of approaching contract reviews and review outcomes. No action is required from participating agencies, unless they disagree with the Lead Agency's decision. In such instances, participating agencies should advise the Lead Agency as early as possible of their intention to continue or exit the arrangement and must advise the supplier in accordance with the timeframes and provisions under the Master Agreement.
Can a CUP contract be "rolled over"?
No. Neither the Lead Agency nor participating agencies can roll the CUP contract over and extend it beyond the initial term plus any additional terms originally negotiated and provided for in the Master Agreement.
What happens if a Lead Agency terminates a CUP contract?
When agencies join a CUP contract they sign an addendum to the Master Agreement. This Addendum effectively establishes an independent contractual relationship with the supplier. Therefore, in the unlikely event that a CUP contract is terminated by the Lead Agency, participating agencies can continue to use the CUP contract for the balance of the term originally agreed in the Master Agreement.
Participating agencies should, however, carefully consider their options in light of the Lead Agency's reasons for terminating the contract.
What happens on completion of the CUP contract?
The group of agencies participating in the CUP contract can go back to market together using the cluster model of syndicated procurement, join another endorsed CUP contract, or approach the market independently.
Specific to Lead Agencies
If an agency is considering leading a syndicated arrangement, who can they approach to test the idea?
Agencies deciding whether or not to lead a syndicated arrangement should engage MED's Government Procurement Development Group as early as possible in the planning process for information on current deals, links to agencies that may be willing to join or also considering a similar tender, market information and an all-of-government perspective on agency contracts. Agencies leading endorsed CUP contracts are also a good source of advice and lessons learned.
What benefits accrue to the Lead Agency of a syndicated arrangement?
As well as the potential to leverage economies of scale to achieve more favourable pricing and contract terms and conditions, leading a syndicated arrangement provides an opportunity to:
- show leadership;
- build or demonstrate procurement capability;
- gain experience in collaboration and cross-agency co-ordination;
- influence or condition the market for future benefit; and
- support syndicated procurement by reciprocating benefits derived from joining contracts established by other Lead Agencies.
Why do agencies need to seek approval before they can approach the market with a CUP arrangement?
Approval must be sought to ensure that the rationale for establishing a CUP contract is sound and potential market effects have been carefully considered; to protect the value of existing CUP contracts; and to provide assurance that the approach to market is well planned to maximise the benefits for all participants.
What are the responsibilities of a Lead Agency?
See Expectations and Responsibilities.
Specific to suppliers
How does a supplier become a syndicated CUP contract supplier?
Suppliers cannot establish CUP contracts. Rather, suppliers must respond to syndicated procurement opportunities and win the business through an open, competitive process.
Note that this does not preclude suppliers from developing a marketing strategy that includes promotion of a "government" price or deal. Agencies wishing to take advantage of this price/deal are still required to ensure they meet their obligations under the Government Procurement Policy framework, Mandatory Rules for Procurement by Departments, and mandatory standards.
How does a supplier know if they are responding to a genuine syndicated CUP opportunity?
Agencies leading genuine syndicated CUP contract opportunities must have prior approval from the Syndicated Contracts Review Board to approach the market. Suppliers can ask the lead agency(s) to provide evidence that such approval has been granted and/or seek confirmation from MED's Government Procurement Development Group.
What should a supplier do if asked to respond to a syndicated CUP opportunity that hasn't been reviewed?
Advise MED's Government Procurement Development Group, in confidence if preferred. Suppliers should be aware that agencies are not permitted to join CUP contracts that have not been reviewed and subsequently endorsed.
Which CUP contracts can suppliers promote to agencies?
Except as provided for under transition arrangements, suppliers may promote only those CUP contracts that have been reviewed and endorsed. Details of all endorsed CUP contracts will be listed on the Procurement website (www.procurement.govt.nz).
Which agencies can suppliers sign up to CUP contracts?
Subject to Lead Agency agreement, suppliers of endorsed CUP contracts may sign up agencies that are eligible to join CUP contracts.
Except as provided for under transition arrangements, suppliers of unendorsed CUP contracts are not permitted to sign up any agencies eligible to join CUP contracts.
Can agencies joining a CUP contract be offered different pricing?
The Master Agreement may include different pricing options to meet a range of requirements (e.g. tiered pricing to reflect different levels of service) or to reward participants for aggregate (not individual participant) volume under one contract. All agencies joining the contract must use the same terms and conditions as the Master Agreement. Pricing may not be altered in contracting with individual participating agencies.
How can a supplier protect pricing and contract related information?
Agencies interested in joining a CUP contract will need to be provided with details of terms, conditions, and pricing contained in the Master Agreement in order to make an informed decision. Suppliers can ask that agencies sign a confidentiality or non-disclosure agreement before releasing this information.
Note that for commercial in confidence reasons, there may be cases where certain information is disclosed only to the Lead Agency (e.g. discounts that may be provided upon achieving agreed aggregate volume targets).
Specific to Joining Agencies
How does an agency know if a supplier is promoting a genuine syndicated CUP contract?
Except as provided for under transition arrangements, agencies may join only endorsed CUP contracts. Details of all endorsed CUP contracts will be listed on the Procurement website (www.procurement.govt.nz). Agencies should check this website or seek confirmation from MED's Government Procurement Development Group to satisfy themselves that a contract has achieved endorsement.
Note that suppliers are not permitted to offer (and endorsement does not extend to situations where) core terms and conditions that are different from those contained in the Lead Agency's original CUP contract or "Master Agreement". Agencies wishing to check whether the copy of the contract they have been provided matches the Master Agreement should contact the Lead Agency.
What should an agency do if asked to join an unendorsed CUP contract?
Except as provided for under transition arrangements, agencies must not join the contract and should alert MED's Government Procurement Development Group, in confidence if preferred, as soon as practicable that an unendorsed contract is being promoted in the market.
When can an agency join a CUP contract?
An agency may join a CUP contract if:
- the contract has been endorsed;
- the agency is eligible to join;
- the CUP contract is able to meet the agency's needs;
- the agency has satisfied itself that the contract offers best value for money for their agency, which necessitates a level of market awareness and adequate research; and
- subject to agreement from the supplier and Lead Agency. (There is no contractual obligation for a supplier to agree to other agencies joining an existing CUP contract.)
Agencies interested in joining a CUP contract should check the contract term, since they can join only for the remaining life of the Master Agreement.
How does an agency join a CUP contract?
Once an agency decides to join an endorsed CUP contract, both the supplier and the agency sign an addendum to the Master Agreement (the original CUP contract).
The addendum establishes a contractual relationship between the individual participating agency and the supplier. The participating agency, not the Lead Agency, is responsible for managing this contractual relationship.
Can agencies joining a CUP contract change terms and conditions of the contract?
Agencies joining a CUP contract are not permitted to re-negotiate any of the core requirements of the Master Agreement (the original CUP contract). They can negotiate only minor additions or alterations and service levels to suit their agency's specific needs.
Can a participating agency make use of additional terms provided for in a CUP contract where the Lead Agency decides not to exercise the option to extend the contract?
Yes. Participating agencies that want to continue using the arrangement for additional terms provided for in the Master Agreement must advise the supplier of their intention to do so in accordance with the timeframes and provisions of the Master Agreement.
Can a participating agency terminate a CUP contract?
A participating agency can terminate their individual contractual relationship with the supplier, in accordance with provisions set out in the Master Agreement. This does not terminate the CUP arrangement or affect the contractual relationship between the supplier and other participating agencies.
Participating agencies intending to terminate their contractual relationship with the supplier should advise the Lead Agency accordingly.
What should participating agencies do if endorsement of a CUP contract is revoked?
Agencies participating in a CUP contract that subsequently has its endorsement revoked may continue to use the contract for the remaining life of the contract.
Participating agencies should, however, carefully consider their options in light of the reasons for revocation.
What should participating agencies do if they are not satisfied with the Lead Agency's performance?
Discuss the matter with the Lead Agency in the first instance. If attempts to resolve the situation are unsuccessful, seek advice from MED's Government Procurement Development Group.
What should participating agencies do it they are not satisfied with the supplier's performance?
Discuss the matter with the supplier in the first instance. If attempts to resolve the situation are unsuccessful, raise the matter with the Lead Agency.