Standard conditions of contract “where everyone gets a bargain”

Government Procurement ReformJune Ralston | Team Leader

Agency Briefing Sessions | 30 March & 1 April 2010

Presentation outline

• Welcome

• Procurement reform overview

• Standard conditions of contract initiative

• Project focus, scope & process

• Challenging clauses

• Q&As

• Consultation process

Government Procurement Reform

• For government – better value through:o Standardised approacho Increased productivity & efficiencieso Cost savings

• For suppliers – better access to opportunities:o Reduced costs of doing business with governmento Familiarity through standard documentso Less red tape

Reform Programme Workstreams

1. Achieving cost savings

2. Building procurement capacity & capability

3. Enhancing business participation

4. Improving governance, oversight & accountability

Survey of current practice

Variety of contracts

Variety of legal conditions

Complexity of contract not commensurate with risk

Inconsistent use of terminology

Some clauses irrelevant to subject matters

Repetition & quality

Suppliers incurring repeat legal costs

Workstreams 3 & 4 - Projects

1. Standard conditions of contract

2. Standard tools & templates

3. Practice Guidance Notes

4. Procurement Planning: APPs & SPOs

5. Supplier Guide to doing business with government

6. Review procurement policy & framework

Standard conditions of contract

Cabinet directive:

“to create a standard, simple, plain English set of conditions of contract for common goods and services to be used by all Public Service Departments and State Services.”

Benefits

• Simplify doing business

• Provide consistency

• Standardise the treatment of legal risk

• Resolve challenging clauses

• Fairer balance of risk

• Allows focus on specification & deliverables

Application

• Required use by:o Public Service departments

o State Services agencies

• State Sector agencies encouraged

Deliverables• Standard conditions of contract

• Contract templates:o services

o goods

o goods & services

• Variation template

• User Guidance Notes

Focus

• “Plain English”

• Clear standard format

• “Common” goods & services

• Reverse some legal default positions

Approach• Advisory groups:

o Strategy Group

o Procurement Development Technical Advisory Group

o T&Cs Working Group

o Business Reference Group

• Stakeholder consultation

Draft conditions of contract• Phillips Fox – external legal advisors

• 3 iterations:

o “straw man” consultation

o “stone man” pilot

o “iron man” first edition

milestone date

“straw man” available beginning April 2010

Consultation period ends 7 May

“stone man” finalised 22 June

Briefing sessions last week in June

Pilot July to December

Review pilot February 2011

“iron man” finalised April 2011

First edition launched May 2011

Timeline

Contract Structure

AgreementAgreementSchedule 1

Schedule 1• parties

• execution

•specific provisions •specification of services

• terms & conditions• definitions

++Schedule 2

Schedule 2

Schedule 3

Schedule 3

+

• variation template

Challenging clausesClause Treatment

insurance • not required as standard

indemnity • delete provision for loss caused by breach• retain for 3rd party IP infringement

limitation of liability • mutual• supplier capped at 3 x total fees

Intellectual property • buyer owns all new IP & licences supplier to use and commercialise

termination • supplier can terminate on giving notice

Standard conditions of contract “where everyone gets a bargain”

QUESTIONS?

Next steps

• “straw man”: beginning April

• Consultation ends: 7 May 2010

• More information: www.med.govt.nz

• Your feedback to: procurement@med.govt.nz

• Next briefing: last week in June

Standard conditions of contract “where everyone gets a bargain”

Government Procurement ReformAgency Briefing Sessions 30 March 1 April 2010