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Procurement Procedure

Category Finance
Type Procedure
Approved by Chief Financial Officer
Date Procedure Took Effect 16 April 2002
Last Approved Revision 7 November 2008
Sponsor Chief Financial Officer
Responsible Officer Procurement Manager
Review Date 9 September 2015


The purpose of these Procedures are to:

  • identify the procurement options available to staff
  • set out procedures and responsibiliites of staff when purchasing goods and services
  • provide staff with a legislative framework when purchasing goods and services 


  • Approved Suppliers - University appointed suppliers 
  • Purchase Card - University issued Purchase Card

Policy Content

Systems and Controls

Heads of Departments are responsible for establishing and monitoring systems for procuring consumables and other goods and services. These systems must comply with University policy and should comply with guidelines as issued by the Financial Services Division. Departments are free to establish their own systems for purchasing subject to compliance with the requirements in these procedures.

The system should include sufficient controls to ensure that purchasing is carried out efficiently and effectively, that all transactions are recorded correctly (i.e. they are real, valued correctly, and classified correctly), and they are authorised within the delegations framework.

Financial Delegations of Authority

Purchasing expenditure is incurred at the point of placing an order, not at the time of payment. Authorisation after the event is not sufficient financial control, as the University is already committed to the expenditure.

The Heads of Department are the ultimate budget holders in each department. They may in turn delegate financial authority down to those staff who are responsible for sub-budgets within a department.  For more information on Financial Delegations.

Segregation of Duties

It is important from an internal control point of view to separate the duties of staff in order to ensure that policies, procedures and financial delegations of authority cannot be over-ridden.

Conflicts of Interest

A conflict of interest arises whenever an individual acting for the University also has an interest in a University supplier.

All conflicts of interest shall be advised immediately they arise, via the Head of Department to the Procurement Manager, Financial Services Division, for recording.

Material conflicts of interest will be referred on to the Chief Operating Officer.

Procurement Methods

There are several methods that staff can use to purchase goods and services on behalf of the University of Otago:

Purchase Orders

All orders for the purchase of goods or services must be placed using an official numbered purchase order.  A purchase order can be generated using:

  • Marketsite (e-procurement)
  • Finance One Purchasing Module
  • A manual (hardcopy) purchase order form

Purchase Card

Low dollar value purchases can be made using a Purchase Card.

Purchasing for Staff

No purchases on credit are to be made for or on behalf of individual staff members. Official University of Otago order forms are to be used only for the purchase of goods and services required for the University's purposes.

Product and Services – Approved Suppliers

The University Procurement Office maintains a list of Approved suppliers for specified goods and services. Suppliers will be included on the Approved Suppliers List after due consideration to the following:

  • Range of products/services supplied
  • Value for money
  • Location of offices/outlets
  • Quality of product/service
  • Ability to deliver to the right place
  • Ability to deliver on time
  • Pricing of products/services
  • Suitability of product/service to end user needs

Value for Money

Officers should adopt a “value for money” approach when goods or services are procured or used. “Value for money”, means the best possible outcome for the total cost of ownership. Value for money does not necessarily mean selecting the lowest price. Rather, officers should achieve the right quality, quantity, and price, at the right place and time. Care should be taken to ensure that unreasonable risk is not assumed in pursuit of the lowest “whole of life” cost.

The University may not recognize an invoice for goods supplied or services rendered unless the official order number and department (as displayed on the order form) are quoted.

Purchase Order Terms of Reference

Purchase Order Terms of Reference have been developed to ensure that the University has terms and conditions which apply for the supply of goods and or services between the supplying party and The University of Otago. These terms will be referred to on official University of Otago Purchase Orders via a hyperlink to a Adobe Acrobat (PDF) version of these terms.

The Terms of Reference are available to staff at the Procurement section of the Financial Services Division website.

Terms of Payment

Payment is made on invoice. Only in exceptional circumstances will the University reconcile creditor statements.

Where an order number is not quoted the University will return the invoice to the creditor unpaid.

Payment will not be made until this information is supplied.  A full schedule showing invoice number, invoice date, the amount being paid for each individual invoice and the total of all invoices being paid, will be forwarded to creditors irrespective of whether payment is by attached cheque or direct lodgement to their bank account.

Payment to creditors will be made on the normal commercial basis.

Interest will not be paid on amounts outstanding unless prior written agreement is given by the Financial Accountant of University of Otago.

Where special terms of trade exist, payment will be made in respect of these terms. Such special terms must have the prior written approval of the Financial Accountant of University of Otago otherwise these terms and conditions shall apply to all orders made by University of Otago.

The only Exception to this policy is where special discounts apply for early payment.

Where incomplete delivery of goods is made, payment will only be made at the discretion of University of Otago. The normal policy is that University of Otago requires complete delivery of goods and equipment before payment is authorised unless special terms have been agreed in writing prior to delivery.

Payment for equipment that requires specialised installation, will not normally be paid until the equipment has been installed and accepted by an officer of University of Otago.

All prices include delivery costs to University of Otago at the Campus as directed on the order form.

These are the complete terms and conditions of purchase relating to goods purchased on the front page of this Order form other than the terms and conditions that are imposed or implied at law. These terms and conditions do not limit in any way terms and conditions that may apply or be imposed at law.


In some circumstances, the University quote the 'NZ Institute of Architects and Master Builders Association agreements for construction'. This is the facility to review the quality and value of the product being supplied to ensure that they are maintained over the whole period of the contact.

Always record purchase terms and conditions in writing.

Standard terms and conditions should be maintained for a range of purchasing types. These must be used in the first instance and where they are found to be inappropriate then terms and conditions must be drafted in writing and be reviewed by legal advisers.

If order forms are sent by facsimile it is vital that the reverse side covering our terms of trade are sent in all cases.

Contract Agreements

Contractual agreements can be set up with suppliers when there is repetitive purchasing from the supplier for like items or where a specific item with either stringent specifications or a particularly high price is being purchased.

These contracts are known as master (or blanket) agreements and specific dollar contracts, respectively and are established following a competitive tender process.

Documentation & Execution

It is important that a written trail is set up:

University of Otago Purchase Orders will cover most situations.

An exchange of letters may define all the necessary terms for simple arrangements.

Please refer to the delegations polity for guidance on authorisation.

All purchases must be carried out on University of Otago Purchase order. Please also make adequate provision for health and safety performance specifications for contractors working on University property. Have the 'contract' reviewed by legal experts where necessary, and include a right to audit clause in all contracts.

With regard to the execution of documents the University Council has resolved the following:

  • that every instrument requiring the affixing of the Common Seal be countersigned by two members of the Council or by one member of the Council and the Chief Operating Officer.
  • that the Vice-Chancellor and/or Chief Operating Officer each be authorised to execute all other documents on behalf of the University. (Minutes of Meeting of Council 12/2/91).

The Financial Delegation Policy and the delegations schedule do not delegate authority to execute documents. In the first instance the (Acting) Registrar should be invited to execute all documents. This will provide uniformity across the University and allow the contract terms to be evaluated prior to committing the University to any obligations.

Any contracts submitted for execution should be accompanied by the following:

Background to the contract including reason for the contract as opposed to an exchange of letters and details of evaluations carried out.

Comparable contracts previously entered including comments on whether identical clauses are included.

Copy of an purchase orders issued relating to the contract.

Legal Aspects of Purchasing

All University departments are required to manage purchasing within the terms of legislative framework. This section provides some brief guidance on areas of law which may impact the purchasing function. More specialised advice is available on request. In any situations where doubt arises regards the applicability of legislation to a transaction further advice should be sought.

Relevant Statutes

Sale of Goods Act 1908. Applies to all sales of goods (except certain sections which do not apply where the Consumer Guarantees Act 1993 applies). Only the Sale of Goods Act may be contracted out of.

Consumer Guarantees Act 1993. Applies to goods and services of a kind ordinarily acquired for personal, domestic or household use or consumption.

Fair Trading Act 1986. Prohibits misleading or deceptive conduct by persons in trade.

Commerce Act 1986. Prohibits restriction of competition and price fixing arrangements.

Health and Safety in Employment Act 1992 and associated Regulations. These set out the health and safety requirements for: services, designers, manufacturers and suppliers. It imposes requirements on both the supplier and the consumer.

Privacy Act 1992. This act requires most personal information to be kept confidential, but also requires that on request, disclosure to a person of all information about that person must be made. Breaches can lead to civil and criminal claims for which the Complaints Review Tribunal can award relief in the form of; a declaration that the privacy has been interfered with, a restraining order, or damages to a limit of $200,000. Every organisation is required to have a Privacy Officer to ensure compliance with the Act and any queries of this nature or requests for personal information should be referred to the Human Resources Registrar.

Official Information Act 1982.

Building Act 1991. The maximum penalties are $200,000 in addition $20,000 per day for using an unsafe building or failing to comply with any notices issued under the Act.

Resource Management Act 1991. A maximum of two years in prison or a fine of $200,000 plus a fine of $10,000 per day for every day or part day for which the offence continues.


A structured program will be operated within the University Procurement Office to select suppliers for the Approved Suppliers List, monitor their continued suitability and usage, and replace them with more appropriate suppliers when necessary.

Officers will take a sustainable approach toward its procurement activities by:

Taking into account the social, economic, environmental and cultural well-being of people and communities, the need to maintain and enhance the quality of the environment, and the needs of future generations.

Thinking broadly about objectives, considering long term as well as short term effects, assessing indirect as well as direct effects; considering economic, social and environmental aspects; and taking extra care when procurement causes changes that might be irreversible or uncertain.

Following public sector principles used to develop sustainable procurement strategies, including:

  • adopting strategies to avoid unnecessary consumption and manage demand
  • in the context of whole-of-life value for money, selecting products and services that have lower environmental impacts through their life cycle compared with competing products and services
  • supporting businesses and industry groups that demonstrate innovation in sustainability
  • supporting suppliers who are socially responsible and adopt ethical practices

During the procurement process, officers will undertake the following types of activities to assist sustainability, where appropriate, and where it does not contravene the procurement principles:

  • specifying products and services considered to be sustainable
  • verifying suppliers’ sustainable management standards
  • including a sustainability clause in contract
  • rating supplier performance against sustainability criteria
  • insisting on sustainability improvement targets for suppliers

Due consideration will also be given to special supplier certification programs where required to meet legislative or other specific University requirements (eg ISO 9000 certification, manufacturers, builders, structural engineers, chartered accounting firms, etc).

Government Supply Brokerage

GSB Supplycorp is a provider of Procurement Services on behalf of 4,500 New Zealand organisations. GSB provide services ranging from contracts to fleet management and Procurement Consultancy. 

The University is a member of GSB which provides access to group contracts; pre negotiated contracts and pricing negotiated on behalf of its members. This should be used, where possible, in the instance where the University does not have existing preferred supplier agreements.

Engaging Consultants

All consultancy contracts are to be based upon a competitive tender process being followed, for contracts over and above $50,000. The Procurement Office will manage the tender process.

The tender process will help the University acquire consultancy services at the lowest cost as well as to deal fairly with all vendors.

Direct or negotiated award of contracts must be fully explained, and approval sought prior to undertaking such commitments.

An official University of Otago purchase order should be issued on each occassion when a consultant is used.

Engaging legal advisors should only be done with the agreement of the Chief Operating Officer or the Vice Chancellor and following a tender process.

There are a number of risks when employing consultants, especially in relation to:

  • clear deliverables
  • a fixed price
  • delivery by a set time as stated in the tender documentation
  • setting out proper terms of reference

Monitoring Supplier Performance

These guidelines assist with the establishment of performance criteria for suppliers based on the types of goods or services provided and the needs of the users of those goods and services. This evaluation process is useful in subsequent purchasing decisions.

It is important to be aware that comments on suppliers performance must be reasonably restrained, as they now can have access to information recorded against their names under the Official Information Act 1982. To avoid any possible action for defamatory statements the comments on performance will be recorded as a rating of 1 -5 for each of the following headings:

  • Right goods and services
  • Right quality
  • Right quantity
  • Right price
  • Right location
  • Right time
  • Right source

Competitive Tendering

The process of tendering is one of the favoured competitive purchasing practices. These guidelines assist in determining when purchases should be made through the tender process. Tenders should be called wherever the value of the goods or service exceeds $50,000 or the annual amount spent with any one vendor exceeds $100,000 per annum.

The University Procurement Office The University Procurement Office is available to offer guidance and advice to University staff in relation to the Policy and Guidelines and will coordinate and provide all assistance in the completion of tenders.

Tendering Forms are available from the Forms Section of the Financial Services Division website.

Purchases For other than Cash/Trade-Ins

A trade-in is considered to be an asset disposal for the purposes of S192 and S193 of the Education Amendment Act 1990. All disposals with a book value greater than an “amount determined by the Minister of Education” requires the written consent of the Secretary of Education before disposal.

The amount determined by the Minister of Education is calculated annually and is published by the Financial Controller.

As part of the negotiations for a purchase of replacement goods or equipment an existing item of equipment may be offered as a trade-in.

Trade-ins should be explicitly dealt with in the contract's terms and conditions, including the value of the trade-in credited by the seller against the value of the new equipment. Full details of the sale of the old asset and the true cost of the new asset must be obtained for updating the Asset Register.

Trials, free goods and trade-ins all provide opportunities for goods and services to pass between entities or individuals without fully recording the transaction. Where-ever possible a price discount should be sought in preference to a 'free' item.

Concessions such as passing on bulk buying discounts can incur Fringe Benefit Tax. This policy has been adopted to minimise the risks from staff purchasing including bad debt, refunds and increased administrative costs.

Overseas Purchasing

Purchasing from overseas is more complex, costly and is subject to greater rise than purchasing from within New Zealand. Risk factors to be considered include foreign exchange fluctuations, legislative framework and after sales servicing. Non Resident Contractors Withholding Tax may need to be deducted if an overseas contractor provides services in New Zealand. In all cases, advice should be sought from the Financial Analyst for your division before any commitment is given on behalf of the University.

As a general rule purchases are only to be made from overseas when price and quality is competitive and the goods or services are unavailable in New Zealand. This is due to the number of issues that have to be considered when purchasing from overseas such as: insurance, delivery expenses, customs duty and clearance, GST payable on imports, foreign exchange fluctuations, applicable legislation, follow up servicing, etc.

Asset Purchasing


Furniture is purchased by departments, via a decentralised divisional budget. The University Procurement Office is happy to assist and advise departments with their purchasing. Any queries should be directed to the University Procurement Office.

Fixed Assets

Sources of funds and procedures for purchasing fixed assets are covered in the Assets Procedures.


The responsibility for the provision of suitable accommodation and the maintenance of that accommodation rests with the Campus Development Committee and Property Services.

Equipment Committee

The Equipment Committee is allocated an annual budget for major capital equipment purchases (<$250,000). Another important function of the Equipment committee is to assist the Vice Chancellor by preparing the University Capital Equipment annual bid. The Committee is serviced by the Procurement Manager, Financial Services Division.

Bids are called via Heads of Centres/Heads of Centres with a view to establishing a five-year plan. Resultant applications are collated via the Procurement Manager, Financial Services Division, and prioritised and referred to the Vice Chancellor by the Equipment Committee. All consequential purchases are carried out via the University Procurement Office.

Step One - Expressions of Interest are invited by the Equipment Advisory Committee for the purchase of major equipment (i.e. a single item of equipment in excess of $250,000). These expressions of interest (2-3 pages) require a brief description of the equipment item, approximate cost, a brief outline on how the equipment will be used, and how it will contribute to furthering the research effort at Otago. Emphasis should be given to the strategic importance of the equipment and how a grant may be used to leverage external sources of research income.
Applications not funded by the Equipment Advisory Committee in one year may be updated and resubmitted in a following year.

Step Two - Successful Expressions of Interest applications will then be invited to submit a Full Application to the Committee to consider more detailed information including a quote for the affected item of equipment.

Equipment for New Buildings, or refurbished space

Forms part of a Capital Works Project managed by Property Services. Property Services are responsible and hold the budget for the entire Project.

Computer Equipment


For information on vehicle purchases please contact the Assets Officer, Financial Services Division.

Leasing/Long Term Hire/Operating and Finance Leases

All agreements exceeding one year are to be approved by the Chief Operating Officer.

The Education Act prohibits Tertiary Institutions from borrowing where the amount to be borrowed exceeds a specified amount.

Where departments are looking at entering a lease they should obtain advice from their Financial Analyst as to the best option for the University overall.

Related Policies, Procedures and Forms

Contact for Further Information

For further information, contact the Procurement Manager, extn 8195 or email