Procurement Procedure

Purpose

To specify the University position, and provide direction, on procurement procedures.

Organisational scope

These procedures apply to all University employees, contractors or consultants acting on behalf of the University in procuring goods or services (including consultant services) by any contractual means.

The procedures do not apply to employment contracts or funding agreements (e.g. sponsorship, memoranda of understanding, deeds).

Definitions

All of Government Contracts (AOG)

Contracts establishing a supply agreement between the Crown and approved suppliers.

Approved supplier

A supplier who has been selected by the University following a competitive procurement process.

Emergency purchase

For employee safety reasons, to address other risk issues urgently or if the University is likely to suffer significantly financially because of the emergency situation.

Finance One

The University's Corporate Financial Management Information System.

GETS

Government Electronic Tendering Service website
The University will advertise all open tenders to the market via this tool.

Head of Department

Refers to the Head of Department, School, or Programme (in the case of Academic Divisions) or Divisional Head (in the case of Non-Academic Divisions, academic Heads of Department and Deans).

Unimarket

The University's e-purchasing system (provided by Unimarket) that allows buyers to select goods from supplier's catalogues, or create standard purchase orders and transact the purchase electronically with the supplier.  This application is available via Finance One.

Open tender

A publically-advertised tender process whereby suppliers are openly invited to respond.

P-Card

A University issued purchase card (i.e. credit card).

Procurement

All the business processes associated with purchasing goods and services.

Purchase Authority

Person duly authorised to approve a specific Purchase Order in accordance with the University Delegations Policy.

Purchase order

A University-initiated request for a good or service, including authorisation to charge the University for that particular good or service.

Selective tender

Tender without open advertising from selected, pre-qualified, suppliers.

Sole source tender

Tender without open advertising from a single, pre-qualified, supplier.

Standing Offer/Blanket Order

Contract created between a supplier and the University with agreed pricings, terms and conditions for the purchase of goods and services with no obligation to purchase. The contract will be valid for an agreed period of time and allows for purchasing on an 'as and when' basis.

Syndicated Procurement

Syndicated procurement typically involves a 'cluster' of agencies aggregating their respective requirements (needs) and collectively going to market for common services and pricing.

Contract Privity

Common Use Provision ( CUP ) clause within the resulting contract, to allow other agencies to join the contract later on the same terms and conditions.

Total cost of ownership

The full cost of a good or service across its life span including purchase price, through life service and maintenance expenses and ultimate cost of disposal. Also referred to as Life Cycle Costing.

Content

1. Purchasing authority

1. Purchases are to be initiated by staff and postgraduate students using an appropriate purchasing method as detailed in clause 2 below.
2. All University purchases must be authorised by a Purchase Authority.
3. The University Supply Chain (Purchasing) function is responsible for the establishment of systems to ensure the purchase of consumables or other goods and services by the University complies with policies, procedures and guidelines issued by the Financial Services Division.

2. Purchasing methods

1. The University Purchasing system and the use of University Funds are not to be used for personal purchases.
2. Requests to the Supply Chain Purchasing Team for goods and services to be purchased in support of University requirements can be made by any University staff member or postgraduate student using Unimarket.
3. Every purchase by the University is to be undertaken through the use of an approved University purchasing channel (in the following order of preference):
   • Unimarket Purchase Order
   • P-Card
   • Approved supplier invoicing such as Consolidated Invoice Processing
   • Petty cash
4. While the use of the University Purchase Order (via Unimarket) is preferred; where the purchase is likely to be a single, non-recurring purchase from a supplier not already within Unimarket, then the use of the P-Card should be utilised in the first instance to avoid any unnecessary administration in processing the purchase and subsequent payment.
5. Petty cash should only be used for low value purchases where appropriate. Petty cash limits are set by the value of the cash float for the department whose cash is being used. Refer to the petty cash procedures for further information.
6. The University may recognise any invoices submitted for payment only where the University official purchase order number is quoted on the invoice supplied. The exceptions for this include situations where a prior arrangement has been made and agreed by the supplier and the University, and/or where a P-Card or Petty Cash has been used

3. Purchasing options

1. There are a number of purchasing options to meet a varied range of circumstances. In order of preference these are purchasing:
   1. From the University’s Internal Service Units. The University operates a wide range of professional business units (e.g. UniPrint, the University Union and Campus Temps).
   2. From existing University approved suppliers under contract. These contracts may be established:
      1. directly between the University and supplier;
      2. through selected contracts with syndicated procurement provisions established by other Crown entities or government departments;
      3. through wider public sector arrangements adopted by the University (e.g. All of Government contracts);
      4. from pre-qualified supplier panels established by the University or via a professional buying organisation that the University chooses to take out membership with, such as N3 purchasing agreements.
   3. through competitive market analysis and associated processes (e.g. tendering/quotes);
   4. through selective (including sole source) tender/purchase;
   5. via emergency purchase procedures as outlined in clause 8 below.
2. Information on these purchasing options is available from the Procurement Office.

Note: The University of Otago P-Card is effective and efficient for small value or infrequently purchased items.

Note: In the normal course of events the University would not expect staff members to be undertaking purchases from their own funds and seeking reimbursement. In the vast majority of cases purchasing should be via a purchase order or p-Card.

4. Restricted categories for purchase

1. The purchasing process for the sourcing of goods and/or services within the following spend categories have been restricted to the use of the approved specific University processes:
   1. IT-related hardware & associated peripherals
   2. Computer software
   3. Mobile phones
   4. Air travel bookings
   5. AirBnb bookings
2. Any purchase that is for Health and Safety Equipment must be secured in line with the University’s Health and Safety policies.

5. Purchasing framework

1. The following framework provides advice on purchasing methods and options for given values of goods and services based on the total cost of ownership (including likely additional requirements after initial purchase):

   Purchase Value	Purchasing Method	Purchasing Option
   <$5,000	Unimarket Purchase Order P-Card Approved supplier invoice Petty Cash	University Contracted Supplier Simple Market analysis
   $5,000 to $100,000	Unimarket Purchase Order P-Card (up to limit defined under P-Card policy) Approved supplier invoice	University Contracted Supplier Minimum of three written quotes (if possible) Formal Tender (if appropriate)
   >$100,000	Unimarket Purchase Order	University Contracted Supplier Market evaluation via formal tender process

2. Goods or services which are available via an existing valid Standing Offer or Contract are able to be purchased in accordance with those agreements without the need for further tendering, regardless of value.
3. Where the selection of the supplier has been made using three quotes or some other method of market analysis, evidence of this analysis should be attached to the resulting purchase order to be retained for audit purposes. Where the supplier selected did not supply the lowest quote, include a brief comment on why that particular supplier was selected such as; ability to meet required delivery timeframe, or overall value for money, etc. The selected quote should be attached to the purchase order sent to the supplier.
4. Any purchase with a value in excess of $5,000 must be endorsed by the Financial Services Division (Finance Advisory) prior to approval by the relevant Purchase Authority (as per the Financial Delegations Policy) prior to purchase.
5. Any purchase with a value between $75,000 and $100,000  for which only one quote is available, or where a formal tender process is considered inappropriate, must be supported by a Procurement Plan or  relevant documentation which provides a justification as to the purchase method requested. This alternative purchase process must be endorsed by the Financial Services Division (Finance Advisory) and approved by the relevant purchasing authority (as per the Financial Delegations Policy) prior to purchase.
6. Purchases greater than $100,000 will require a Procurement Plan to be completed to determine the most appropriate purchasing option unless that purchase is being transacted using an existing valid contract or via an Internal Service Unit.
7. Purchases must not be designed, otherwise structured or divided, at any stage, in order to cause the value to fall below the thresholds listed above to avoid the requirement to competitively market test the purchase or avoid financial endorsement by Finance Advisory.
8. High-value purchases (in excess of NZ$500,000) should be notified to the Financial Services Division upon approval of the Purchase Order  (email treasury.accountant@otago.ac.nz) for the purposes of cash flow planning. This advice should include the contracted payments schedule including anticipated invoice payment dates.

6. Tendering principles

1. The University requires that all procurement of works, goods or services with a value over $100,000 (excl. GST) are subject to a competitive procurement process.
2. Tendering processes are to be used to:
   1. establish the competitive prices and terms available;
   2. explore or test the market for alternative opportunities;
   3. fulfil a public duty of fairness and equity between suppliers;
   4. reduce the risk to reputation arising from allegations of purchaser bias or conflicts of interest;
   5. confirm current market intelligence; and
   6. identify the best source of goods and services.
3. The content of all tenders received by the University are confidential, and are not to be discussed, or shared under any circumstances with competing suppliers.
4. Anyone involved in a University tender process must meet their obligations under the University’s Conflicts of Interest policy.
5. No commitment, express or implied, should be given to any supplier at any time up until the tender evaluation summary recommendation has been accepted by the relevant purchase authority.
6. The University will use tender processes that allow for transparency of decision-making and subsequent review of the process of decision-making.
7. All University tenders should be coordinated through the University Procurement Office to, at a minimum, obtain a tender number and for publication on the Government Electronic Tender Service (GETS) where necessary. Departments are encouraged to contact the procurement office as soon as practical after identifying that a procurement process is required.
8. Find further information on the University Tender Process

7. Tendering methods

1. Open tenders should be advertised in a manner so as to attract a wide response. At a minimum, such tenders should be listed via the Government Electronic Tendering Service website.
2. Selective (including sole source) purchase or tender of any goods and services may be appropriate where:
   1. It is an emergency purchase (see section 9 below);
   2. The goods or services require specialised skills or are very complex, and there are limited qualified suppliers;
   3. The required goods and services are only available from one source, or limited sources, in the relevant timeframe;
   4. The standardisation or compatibility requirements require the use of a specific supplier;
   5. The goods or services are substantively identical to those purchased within the last twelve months under an open tender process;
      1. careful consideration should be given to changes in market conditions and the entitlement of other tenderers to compete on more favourable terms; and,
      2. Purchasing Officers should ensure that the element of competition is maintained by requesting that the selected tenderer submit a firm quotation on each occasion this dispensation is used with no indication that the selected tenderer is the only bidder.
   6. The goods or services are subject to prototype or development work. In this case, the following factors should be considered when selecting the vendor and negotiating any subsequent contract:
      1. the technical and commercial experience of the prospective vendor;
      2. the ownership of the finished product, protection of intellectual property, possible patent rights and ownership of any moulds and dies;
      3. the basis of payment including method of calculating charges, progress payments and final payments;
      4. ownership of pre-production samples; and,
      5. rights to commercial development of the product.
   7. The cost of a procurement process is likely to be disproportionate to the value or benefits likely to be gained; or
   8. The goods or services can be obtained via a syndicated procurement or contract privity opportunity clause that provides a commercial benefit to the University and avoids any further cost of procurement.
3. Each decision to purchase via selective tender for goods/services in excess of $100,000 must be supported by an approved procurement plan. The decision to proceed with selective tendering rests with the Delegated Purchase Authority. This documentation should be attached to the Unimarket requisition for future reference and audit purposes. A selective tender cannot be used to:
   1. Avoid competition;
   2. Protect domestic suppliers;
   3. Discriminate against any domestic or international supplier.

8. Establishment of contracts

1. The establishment of standing offers and contracts (either established by the University or as part of a syndicated procurement opportunity) should be the result of a formal tender process (either an open tender or a selective/sole source tender).
2. Contracts are to be executed in the name of the University of Otago and where possible, the University Contracts Templates should be used in the first instance. All standing offer contracts or agreements are undertaken on behalf of the University and will be available for use by any University of Otago department.
3. The financial delegation’s policy and procedures along with the delegations schedule classifies the categories of contracts and who has delegated authority to approve them. Contracts can only be approved by officers authorised to do by the Financial Delegations Procedure.
4. All contracts must be registered within the respective Department’s legal library within OurDrive. Contracts executed for the purchase of goods and services must be advised to the University Procurement Office who will allocate a contract number, where none exists, and, if required, provide advice to users on how to record the contract in the Ourdrive Contract Register Tool for contract recording and administration purposes.

9. Emergency purchases

1. In case of an emergency, normal purchasing rules may be set aside for specific goods and services where:
   1. the goods and/or services are required to complete or continue significant tasks
   2. it is impossible to purchase goods and services under normal purchasing procedures.
2. Emergency purchasing is to be used solely to meet immediate emergency or genuine unforseen  requirements,  and must never be used solely for expediency. Authorising officers are to ensure that emergency purchases are strictly controlled.
3. Approval of Emergency Purchases is to be made in accordance with the University’s Financial Delegations Policy/Procedures. Where the value of an emergency purchase is in excess of $75,000, the respective Pro Vice Chancellor ( PVC ) or Service Division Head must approve that the purchase meets the Emergency Purchase threshold prior to committing expenditure.

10. Overseas purchases

1. Purchases are normally only to be made from overseas when price (including delivery and associated costs) and quality are competitive and goods are unavailable in New Zealand, which is aligned with the New Zealand Governments’ broader outcomes.
2. The FSD Treasury Accountant must be notified where purchases require foreign currency and are in excess of NZD$50,000 in value so that appropriate forward cover can be arranged as necessary.

11. Probity/conflicts of interest

1. Anyone involved in a University purchase process must meet their obligations under the University’s Conflicts of Interest Policy. A conflict of interest can be:
   1. Actual: where the conflict already exists
   2. Potential: where the conflict is about to happen, or could happen
   3. Perceived: where other people might reasonably think that a person has been compromised.
2. University staff and contractors must comply with the following principles of probity (ethical conduct) throughout all stages of the procurement and contracting process:
   1. use of a competitive process where possible;
   2. transparency;
   3. identification and resolution of conflicts of interest;
   4. fairness and impartiality;
   5. security and confidentiality.
3. All conflicts of interest shall be managed in line with the University’s Conflicts of Interest Policy and recorded in the University Conflicts of Interest Register.

12. Use of third party (agents or brokers)

1. There is no restriction on the use of agents or brokers. When considering their use, issues associated with total costs of ownership, effectiveness and efficiency, and leverage should be analysed so that the value added by agents or brokers is clearly articulated and understood. The use of an agent or broker does not negate the need for compliance  with the University Procurement Policy and/or procedures; both in terms of how the Agent or Broker was initially selected and their subsequent purchasing activity on behalf of the University.

13. Trade ins, free goods and trial items

1. 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.
2. A trade-in is considered to be an asset disposal for the purposes of S282 and S283 of the Education and Training Act 2020. All disposals with a book value greater than an “amount determined by the Minister of Education” (and advised annually by FSD to Cost Centre Heads) requires the written consent of the Secretary of Education before disposal. Any further queries on this subject area should be directed to the Financial Accountant, FSD .
3. 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.
4. Trials, free goods and trade-ins all provide opportunities for goods and services to pass between entities or individuals without fully recording the transaction. Wherever possible a price discount should be sought in preference to a 'free' item.
   1. If the good being supplied ‘free’ is an asset, where title as passed to the University, it should be advised to the University Assets and Insurance Accountant  for registration in the University Asset register.
   2. Any ‘Trade in’ of existing University Assets needs to be advised to FSD Assets and Insurance Accountant to ensure that the asset is correctly disposed of within the University Asset Register.
   3. Goods provided for trial, where the asset ‘risk’ passes to the University, must be notified to the University Insurance Officer so that the appropriate insurance coverage can be arranged.

Related policies, procedures and forms

• Acceptance of Gifts, Benefits and Gratuities Policy
• Conflicts of Interest Policy
• Procurement Policy
• Petty Cash Procedure
• Financial Delegations Procedure
• Purchase Card Procedure
• University Conflicts of Interest Register
• Health and Safety Legislation
• University Purchasing System (Unimarket)
• Sensitive Expenditure Procedure and Guidelines

Contact for further information

If you have any queries regarding the content of these guidelines or need further clarification, contact:

Stephen Hall
Procurement Manager
Email stephen.hall@otago.ac.nz