New Zealand updates defence procurement rules, maintains ban on offsets

11 July 2019

New Zealand has recently identified a requirement to procure Boeing P-8A maritime patrol aircraft. From October 2019 all New Zealand defence suppliers will be required to demonstrate a commitment to support ‘broader outcomes’ such as economic development. Source: US Navy

Key Points

  • New procurement rules ban offsets but outline requirements for 'broader outcomes' such as economic benefits
  • Guidelines are introduced as New Zealand pursues USD13 billion military modernisation programme

The New Zealand government has updated rules governing procurement across sectors including defence.

The new 'Government Procurement Rules, 4th Edition' will become active from October 2019 and replace the 'Government Rules of Sourcing', which were first published in 2013.

According to the government, the new guidelines have been developed to align with its expectations that all procurement will be "leveraged to achieve broader outcomes". Broader outcomes are described as "secondary benefits", such as those that positively impact New Zealand's economy, society, and environment.

"Broader outcomes require [procurement agencies and contractors] to consider not only the whole-of-life cost of the procurement but also the costs and benefits to society, the environment, and the economy," the rules state.

Despite this, the new procurement rules state that offsets, including offsets in defence procurement, will continue to be banned. "An agency must not ask for, take account of, or impose any offset at any stage in a procurement process," it says.

New Zealand regards offsets as discriminatory, with the procurement rules stating that offset is viewed as an "undertaking to develop the local economy or improve the balance-of-payments accounts that a supplier must fulfil in order to be awarded the contract".

The key change in the 4th edition of New Zealand's procurement rules is a transformation in the way value is assessed to support "broader outcomes".

To this end, the rules state that each government procurement agency - including the Ministry of Defence (MoD) or New Zealand Defence Force (NZDF) - must "consider and incorporate where appropriate, broader outcomes when purchasing goods, services, or works".

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