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Procurement – law, practice and future trends

Home Insights Procurement – law, practice and future trends

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Contributed by: Mei Fern Johnson and Meg McGlone

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Published on: April 05, 2017

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Russell McVeagh held the first session of our 2017 Public Sector Focus Seminar Series last week, covering Procurement – law, practice and future trends presented by Mei Fern Johnson and Meg McGlone. 

Our key takeaways from this include:

  • The longstanding legal position relating to judicial review of contracting decisions has been confirmed by a recent Court of Appeal decision. A-G v Problem Gambling Foundation of New Zealand [2016] NZCA 609 held that a contracting decision made by a public body ordinarily will not, absent fraud, corruption or bad faith, or some relevant statutory underpinning requiring the public body to exercise its contracting power in a particular manner, be subject to judicial review.
  • The recent Supreme Court decision of Ririnui v Landcorp Farming Ltd [2016] NZSC 62 demonstrates when a seemingly commercial decision (ie the sale of land by a state-owned enterprise) may fall outside the realms of an ordinary commercial decision. The fact that the decision involved former Crown land, Treaty of Waitangi obligations and Māori interests meant that the sale of land in the circumstances of that case was not just an ordinary commercial transaction but had a substantial public interest component, justifying judicial consideration.
  • While the legal position has been clarified, we consider that:
    • Ensuring good optics continues to play a significant role in managing procurement legal challenges. 
    • Risk of legal challenge remains real as unsuccessful tenderers could have commercial incentives to take action to suspend a contract award. For example, in Problem Gambling, the incumbent provider's contract was extended for more than 2 years pending judicial consideration of that procurement decision.
    • Risk of legal challenge increases with the complexity of the procurement process: (1) in terms of the agency being able to conduct the procurement process as intended; and (2) such complexity is likely to result in tenderers incurring significant time and cost participating in the procurement process. This could incentivise unsuccessful tenderers to challenge the outcome. 
    • The seeming rise of allegations of corruption or lack of business integrity relating to the award of contracts by public sector agencies (recently relating to property deals, roading contracts, and construction of a sewage plant) may lead to increased scrutiny of contract award decisions, including relating to conflicts of interest or unfair information advantages.
    • Recourse to alternative mechanisms such as reviews, audits or directions conducted by the Office of the Auditor-General, Ombudsmen or the agency's governing Ministers, may become more prevalent.
    • Robust procurement planning should include a broader risk analysis than just legal risk. Ultimately, the key objective is to ensure that the procuring agency awards the contract in a fair and open manner, and on a timely basis, in order to achieve its policy objectives as intended through implementation of the contract.

Please get in touch with Mei Fern Johnson or Meg McGlone if you'd like to hear more or to further discuss.

Our second session of our 2017 Public Sector Focus Seminar Series, on Health and Safety in the Public Sector, will be held on 11 April 2017 and is open to members of the public sector.

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