HAWKE’S BAY REGIONAL COUNCIL
Wednesday 20 May 2020
Subject: Procurement Policy
Amendments to Support the HB Economic Recovery
Reason for Report
1. This item makes
recommendations for Council to consider, to strengthen its Procurement Policy
to better support Hawke’s Bay’s economic recovery, and seeks
feedback on information that could be usefully incorporated for future
Procurement update reports to the Finance, Audit and Risk Sub-committee.
Officers’
Recommendation(s)
2. Officers
recommend councillors review the current Procurement Policy and provide
feedback on the proposed amendments that would strengthen the ability to
support the region’s economic recovery.
3. A Procurement
Policy review is scheduled to be completed in June 2020, however, officers
suggest the following pro-local actions should be made operational now:
3.1. Significantly
increase the evaluation weighting applied to the Local Economic Impact
3.2. Proactively
encourage local contractors to bid for projects
3.3. Using direct
tender processes limited to local contractors (where reasonable).
Background / Discussion
4. A report on
progress made in developing a centralised procurement function for HBRC will be
made to the next Finance Audit and Risk Sub-Committee.
5. That report
will provide information on contracts issued since July 2019. It will
include the value and risks associated with contracts valued at $50k and over,
or that have been assessed as carrying significant risk. The report will also
identify all current contracts due to expire within the next three months.
These metrics were requested by the former Finance, Audit and Risk
sub-committee.
6. From a business
perspective, the obvious benefits of an effective procurement process are
financial upfront cost savings by procuring goods and services at the best
price available.
7. Effective procurement
also ensures that projects are delivered to time and budget, with reduced
exposure to commercial risk by way of a consistent and appropriate process,
which aligns with HBRC procurement principals.
8. However, other
considerations beyond price and risk, influence purchasing decisions and these
are reflected in HBRC’s current procurement principles and
considerations.
Procurement in Response to Current
Events
9. In response the
current economic downturn as a result of the COVID-19 pandemic and the Drought,
Councils recovery strategy aims to support local businesses to reset and
rebuild our economy to support long-term recovery.
10. Council is committed to
buying local services and products wherever possible through its procurement
policy, by giving weighting to local providers of trades and services. It is
proposed to add this statement to the current policy document
11. The current Procurement
Policy (appended) is guided first by principles (Section 3), principle 3
states:
11.1. “Unfair
advantages, including those arising from incumbent arrangements, should be
identified and addressed. HBRC and its employees will act fairly and reasonably
and will be visibly impartial in their decision-making.”
12. Principle 3 is supported
by item 6 under Practical Considerations:
12.1. “HBRC’s
wider commitments and obligations must be considered, including purchasing
locally, whole of life costs, environmental sustainability, health and safety
and compliance with other HBRC agreements. Where practical and relevant,
supplier agreements must align with and reflect HBRC’s wider commitments
and obligations.”
13. These wider obligations
include ‘Climate.Smart.Recovery.’, to support the local economy,
future economic development, and climate change mitigations.
14. Under current
circumstances of an economic downturn, and with the goal of better supporting
local business, officers recommend consideration should now be given to
applying a higher weighted evaluation score for local suppliers. Currently the
weighting is 5%. Would an increase to 15% be acceptable? Increasing the
‘local’ weighting percentage reduces the weighting for other
criteria such as quality, previous experience, and price.
15. There may also be
justification for direct purchasing rather than a competitive process for
selecting suppliers.
16. Under Purchasing Ethics,
Section 5.7 Buying local states:
16.1. “HBRC supports
purchasing from local suppliers based on the benefits this provides the local
community and economy and HBRC employees will consider the availability and
capability of suppliers in the local market. However, HBRC should always
balance the benefits of buying locally with ensuring that HBRC and its
ratepayers and the community will receive optimal value. A decision
to purchase goods, works or services from a supplier where the locality of the
supplier is the determining factor (rather than price and/or quality factors)
should consider one or more of the following.
16.2. The importance of the
goods or service being available locally (due to factors such as time
constraints or availability of key personnel to respond to requests for service
from HBRC).
16.3. The importance of
local knowledge of the Hawke’s Bay regional environment.
16.4. The importance of
supplier knowledge and understanding of HBRC’s operational practices,
processes and systems.
16.5. Where the locality of
the supplier is the determining factor in a purchase, HBRC will document this
and include the justification for approving the purchase on this basis.
16.6. In a Major Procurement
that may include several interested suppliers (local and non-local) via a
competitive process, the importance of local presence and/or knowledge should
be clearly highlighted in HBRC’s procurement documentation and
submissions should be evaluated accordingly.”
17. A current example of
proposed direct local purchasing is a contract to drill bores to gather
additional data to support the Skytem project for ground water modelling. HBRC
is in negotiation with two local suppliers to award individual bore contracts
based on an agreed pricing schedule. This will ensure both have a sustainable
business model rather than awarding all the drilling contracts on the basis of
lowest price conforming tender. It is important that HBRC supports businesses
and procurement is based on a sound and historically proven professional
relationship.
18. Council has recognized the
cash flow pressures being experienced by local and national service providers
and where policy indicates payment on the 20th of the month
following invoice, we are now offering a 5 day turn around for invoice payment
to help all of our suppliers.
19. Where possible contracts
with local suppliers that have performed well are now being considered for term
extension as a variation when appropriate.
20. A partnership ethos has
been promoted, with local suppliers being contacted to ask how HBRC can help,
and what could we do to support them towards a sustainable business model.
21. A cross
council initiative led by the regional procurement director is collating
planned infrastructure projects to optimize collaborative purchasing, with
sustainable outcome contracting as a key driver.
Options
Assessment
22. The Procurement Manager
would like to consider options to amend and improve the current policy, and
receive feedback from Councillors on any additional reporting metrics that
would be useful for the Finance Audit and Risk Sub-Committee
Strategic Fit
23. The development of a
centralised procurement and contract management function has assisted HBRC to
adopt best procurement practice, to support HBRC strategic goals associated
with Climate.Smart.Recovery.
Consultation
24. Consultation is not
required to canvas the view of Councillors on policy development
Decision Making Process
25. Council
and its committees are required to make every decision in accordance with the
requirements of the Local Government Act 2002 (the Act). Staff have assessed
the requirements in relation to this item and have concluded:
25.1. The
decision does not significantly alter the service provision or affect a
strategic asset.
25.2. The use
of the special consultative procedure is not prescribed by legislation.
25.3. The
decision is not significant under the criteria contained in Council’s
adopted Significance and Engagement Policy.
25.4. The persons affected by
this decision are HBRC staff
25.5. The
decision is not inconsistent with an existing policy or plan.
25.6. Given
the nature and significance of the issue to be considered and decided, and also
the persons likely to be affected by, or have an interest in the decisions
made, Council can exercise its discretion and make a decision without
consulting directly with the community or others having an interest in
the decision.
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Recommendations
That
Hawke’s Bay Regional Council:
1. Receives and
considers the “Procurement Policy Amendments to Support the HB Economic
Recovery” staff report.
2. Agrees that
the decisions to be made are not significant under the criteria contained in
Council’s adopted Significance and Engagement Policy, and that Council
can exercise its discretion and make decisions on this issue without
conferring directly with the community or persons likely to have an interest
in the decision.
3. Provides
agreed amendments to support the region’s economic recovery to staff
for inclusion in the HBRC Procurement Policy.
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Authored by:
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Mark Heaney
Manager Client Services
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Approved by:
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Jessica
Ellerm
Group Manager Corporate Services
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Attachment/s
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⇩1
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HBRC
Procurement Policy
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