Appendix 2: Extracts from Ministry of Health procurement policies

Inquiry into the Ministry of Health's contracting with Allen and Clarke Policy and Regulatory Specialists Limited.

July 1997 Guidelines for Engaging and Managing Consultants

This policy document referred to:

  • "A need for greater openness in the tendering process for engaging consultants."
  • "A need for written contracts."
  • "Contracts need to be negotiated and concluded prior to the service provider commencing work."
  • "A system of effective consultant management is required."
  • "As a general rule there must be some competition in the tender process."
  • "There are two basic types of selection process approved by the Ministry ... these are the competitive supplier method and the open public tender method."
  • "Where the cost is estimated to be less than $25,000 it may be appropriate to grant the assignment to a known supplier from a list of competitive suppliers."
  • "Once a consultant is engaged a procedure must be established for the review of the work produced."
  • &A Ministry Project Manager is to be appointed for each consultant at the very start of the project."
  • "At the completion of the project, a review or evaluation of the assignment must be completed."

November 2001/April 2002 Procurement of Goods and Services

The November 2001/April 2002 policy document, which is still in effect, had similar provisions to the 1997 document and, among other things, referred to:

  • "The policies and instructions in this document must be followed without exception ... where the value of the goods and services exceeds $10,000."
  • "Where it is considered that the procurement and contracting process should not be followed, a written request for an exemption must be made."
  • "Achieving value for money depends upon competition between suppliers of goods and services."
  • "A business case must be prepared where the value of goods and services are in excess of $10,000."
  • "Keep sufficient records to show that due process has been followed ... and the process has been fair and equitable."
  • "As a general rule there must be competition in the tender process."
  • "In the case of contracts for relatively small amounts of money (less than $25,000) the minimum reporting requirements should relate to performance against an agreed set of milestones. These milestones should be specified in a letter of agreement or in the contract."
  • "Contracts in excess of $25,000 will require reporting against the factors specified above at agreed intervals."
  • "There are four types of selection process approved by the Ministry of Health. These are emergency procurement, quote, closed tender, open tender."

March 1999 HFA Quality Services: Contracts Manual and Associated Guidelines

Key provisions are:

  • "HFA has a considerable discretion in deciding what services to purchase, how to purchase, and who to purchase services from."
  • "While fully competitive purchasing processes are not always appropriate or possible, some element of competition (whether existing or potential) can often enhance..."
  • "The HFA must ensure that its processes for determining how to purchase and who to purchase services from are robust, fair, reasonable and defendable."
  • "...decisions about the purchasing process and/or selecting a preferred provider must not purposefully discriminate against new entrants to the market."
  • "Competitive purchasing processes can be costly."
  • "In certain circumstances the HFA may wish to purchase services without conducting a contestable process. For example, the HFA may wish to award 'preferred provider' status to a particular provider in a certain area, for certain services and for a set period - without giving other providers the opportunity to compete for this opportunity. The HFA may contemplate doing this because, for example, it believes there is only one provider capable of providing the relevant services..."
  • "...if competition exists in a market for services (or is likely to exist), it is usually prudent to purchase that service under a contestable process."
  • "A further risk is that a complaint by a disaffected provider who misses out on the opportunity to provide services could prompt an investigation by the Office of Auditor-General."
  • "One of the best ways to manage and mitigate the above risks is to consult potentially interested parties prior to making a decision to adopt a non-contestable process."
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