Since the 1980s, central government service delivery has become increasingly decentralised. Rather than delivering services directly, agencies now contract widely with private providers for core operations and specialist support. Contracting out delivery can create efficiencies compared to maintaining in-house functions, but carries corresponding risks of conflicts of interest and supplier favouritism, and thereby potential misuse of public funds.
To address these risks, and to ensure public procurement is fair, competitive, and transparent, the government has adopted the Government Procurement Rules (“GPR”).
Government Procurement Rules
The GPR are mandatory for all government departments, the Police and Defence Force, and most Crown entities. Many other public bodies, including local councils and school boards of trustees, are expected to follow the rules as a matter of good practice.
The GPR incorporate the Government Procurement Charter and the Principles of Government Procurement, which emphasise fair competition, integrity, transparency, and sound management of public funds. The overarching purpose of procurement under the GPR is to achieve public value, not just the lowest price. This includes considering economic, social, cultural, and environmental outcomes that benefit New Zealand communities. Recently announced changes to the GPR, set to take effect on 1 December 2025, place a greater emphasis on economic benefits than was previously the case.
To promote the GPR objectives, contracts above particular value thresholds must be publicly advertised on the Government Electronic Tenders Service (GETS), giving all capable suppliers a fair chance to compete. Where open tendering is impractical, agencies must record and justify any limited or direct approach to particular suppliers.
Where a procurement exceeds the value threshold for open tendering, the GPR also mandates that the procuring agency cannot favour local suppliers over international ones when awarding contracts. However, from 1December 2025, agencies must give preference to local suppliers when awarding contracts that fall beneath the value threshold for open tendering.
The GPR set minimum integrity and governance rules, including requirements for agencies to manage conflicts of interest, protect confidential supplier information, and maintain accurate records of their decisions and contracts.
The GPR are not legislation. The GPR have formal effect as a policy decision of Cabinet and public officials are required to follow government policy. However, they are not legislation, and are therefore not directly enforceable in court.
Accountability
There are a number of avenues (legal and non-legal) for ensuring accountability for following procurement rules.
Legal accountability
In theory, a public agency putting a contract out for tender could contractually bind itself to submitting tenderers to follow a particular process. Failure to follow the process would amount to a breach of contract, entitling disappointed tenderers to sue for damages.
However, a mere request for tenders does not amount to a contractual offer. Something more is required to suggest an intention to create a legal relationship. The opposite is often the case – to avoid legal risk, most public agencies explicitly state in their proposals that their tender requests are not a contractual offer.
Suppliers can challenge procurement decisions via an application for judicial review. Judicial review is a legal claim that allows the decision-making procedures of public officials to be scrutinised by the courts. Claims based on procurement decisions usually rest on failures to follow correct procedure (such as using different evaluation methods than those advertised in requests for tender) or for perceived bias or conflict of interest.
However, while ordinary public decisions can be challenged on these grounds, they are not normally applicable to procurement decisions. In Attorney-General v Problem Gambling Foundation, the Court of Appeal strongly affirmed that commercial decisions of public bodies can ordinarily only be challenged for serious impropriety –this includes fraud, corruption, bad faith, and significant conflicts of interest.
Not every public contracting decision will attract this narrow approach. Sometimes, while the decision may have a commercial appearance, it nonetheless engages some significant public interest. For example, in Ririnui v Landcorp Farming Ltd, a Crown entity’s decision to sell a block of land was, in substance, a public decision despite its commercial appearance, as the sale implicated Crown obligations to Treaty of Waitangi claimants.
However, these cases are the exception to the rule, especially where the party challenging the decision has a purely commercial interest in the outcome. Successful legal challenge of procurement decisions can be expected to be rare under the Problem Gambling approach.
Non-legal accountability
While legal options have a steep threshold, non-legal options can provide effective relief. Public agencies are expected to maintain a process for hearing supplier complaints, and there are reputational and other incentives to ensure such complaints are dealt with fairly.
Public procurement falls within the remit of the Office of the Auditor-General, which can launch an inquiry into failures to follow the GPR under s 18 of the Public Audit Act 2001. It can launch an inquiry on its own motion or upon request, providing independent oversight for serious complaints about procurement breaches. The Auditor-General is required to report to Parliament annually on performance of its functions, including s 18 inquiries.
Failure to follow the GPR can also be the subject of a complaint to the Ombudsman under the Ombudsmen Act 1975.The Ombudsman may investigate complaints alleging unfairness, bias, or procedural irregularity in the conduct of a procurement process, and can make findings and recommendations for corrective action. However, as the Ombudsman’s powers are recommendatory rather than binding, and given the often lengthy processing times for investigations, this option is less effective than it used to be.
Finally, public service chief executives can face Parliamentary questioning about procurement failures within their departments in Scrutiny Week.
It is not only agencies that face possible sanctions. The Public Service Commission’s Standards of Integrity and Conduct form part of each public sector employee’s employment contract. Serious breaches of the GPR could breach the Code, thereby potentially justifying a finding of misconduct or serious misconduct, with attendant employment law consequences (including termination of employment).
For further information on government procurement, please contact Director Brigitte Morten
