Guide on transition to all-of-government contracts

Summary

1. Background

1.1 Cabinet approved an agenda to reform State sector procurement policy and practice in May 2009 (CAB Min (09) 17/3). The reform has four major themes:

• achieving cost savings;
• building procurement capability and capacity;
• enhancing business participation; and
• improving governance, oversight, and accountability.

1.2 To contribute to cost savings, a number of all-of-government contracts will be established in common areas of spend. To make these contracts as attractive to the market as possible, Public Service departments and State Services agencies will be required to use them. Their use by agencies in the wider State Sector will be optional.

1.3 By 30 June 2010 contracts will be established in the following spend areas:

• IT equipment (desktops, laptops and peripherals e.g. mouse, keyboard, monitor);
• Multi-functional devices (printer, photocopier, scanner, fax combined);
• Passenger vehicles, 4x4s, utes, light commercial vans (ie non-specialist vehicles readily available from main dealers); and
• Stationery.

1.4 Agencies will need to examine their existing/planned contracts in these spend areas, determine appropriate transition dates, and plan accordingly.

1.5 Note that all-of-government contracting arrangements will be structured to accommodate agencies that have entered leasing arrangements or have outsourced procurement in these spend areas (eg where IT equipment is purchased by an IT service provider on the agency's behalf).

2. Transition Timeframe

2.1 In order to deliver the cost savings sought by Ministers and enable participating agencies to gain benefits quickly, the volume of business managed through all-of-government contracts needs to be maximised as early as possible. Agencies are, therefore, expected to transition from existing arrangements to all-of-government contracts at the earliest reasonable opportunity.

2.2 It is recognised that transition will occur as agencies' existing contracts come to an end. The expectation is that all agencies will have completed the transition within two years of the award of the all-of-government contract (ie by 30 June 2012 for the contracts being established by 30 June 2010). In exceptional circumstances, perhaps due to excessive termination costs, a longer transition may be agreed.

2.3 The actual date of transition for each contract will need to be mutually agreed between the agency, the Centre of Expertise managing the all-of-government contract, and the successful supplier(s).

3. Options For Managing Transition

3.1 The following options for managing the transition to all-of-government contracts provide flexibility to accommodate different agency needs and circumstances and are endorsed and supported by the Ministry of Economic Development:

Contracts due to expire after 30 June 2010

• Should not be re-tendered.
• Provisions to terminate existing contracts at no financial penalty to the agency, should be exercised to enable transition to the all-of-government contracts at the earliest opportunity.

Contracts due to expire/be tendered on or before 30 June 2010

• Competitively tender the contract as normal, with an end date no later than 30 June 2012 to enable transition to the all-of-government contract at, or before that time; or
• As above, but incorporating contract provisions for annual review and right of termination to give flexibility to transition to the all-of-government contract as soon as possible from 30 June 2010. For example, "the contract will be awarded for an initial period of 12 months with options to extend by (Agency X) for further 12-month period up to a maximum of (X) years in total"; or
• Negotiate a short term extension to the existing contract, transferring onto the all-of-Government contract on or at the earliest reasonable opportunity after 30 June 2010.

3.2 Agencies are responsible for determining which of these options is most appropriate, based on their specific business needs and contractual arrangements in each area of spend and the overall principle of supporting and moving to all-of-government contracts as soon as possible.

3.3 The costs, benefits and risks associated with each option should be considered, including weighing up the potential to gain quality supplier responses and pricing for a short term contract with the cost of the procurement process.

3.4 The decision should be documented in the normal way.

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