New Zealand: To buy or not to buy New Zealand

Brief Counsel
Last Updated: 2 September 2011
Article by Siobhan Hale and Jane Parker

When a large, procurement contract is awarded overseas, there is often a public backlash. Two recent examples are KiwiRail's decision to source its rolling stock from China and the RSA's decision that the iconic ANZAC day poppy would also now be imported from China. Cost was an important factor in both decisions.

Often the debate is particularly intense when a government agency is involved, provoking calls for the public sector to pursue a "Buy NZ" policy.

So what are the facts?

Current procurement policies

Those running government tenders and evaluating bids already have the power to assess the benefits of using local suppliers. It is simply a matter of rating, within the overall tender evaluation, whether the New Zealand bidders can offer a 'home game advantage' - or, more precisely, calculating the acknowledged benefits that can flow from using local suppliers.

This is not to say that a government tendering authority could or should specify the use of local businesses as part of a government tender process. New Zealand's international trade obligations, the government's published procurement policy (outlined in guidelines published by the Ministry of Economic Development) and the good practice guidelines published by the Auditor General (and applying to all public entities, including Crown entities), would in all likelihood prevent the specification of local content and/or suppliers in a public sector tender document.

Seeking value for money

At the heart of all government tendering procedures is an obligation to seek "value for money". This is a nebulous concept, with both New Zealand and international case law suggesting that the phrase is meaningless in the absence of explicit criteria against which it can be measured.

Fortunately, however, in relation to government procurement, such criteria do exist. The procurement guidelines published by the Office of the Auditor General state that:

Value for money means using resources effectively, economically, and without waste, with due regard for the total costs and benefits of an arrangement, and its contribution to the outcomes the entity is trying to achieve. In addition, the principle of value for money when procuring goods or services does not necessarily mean selecting the lowest price but rather the best possible outcome for the total cost of ownership (or whole-of-life cost). Value for money is achieved by selecting the most appropriate procurement method for the risk and value of the procurement, and not necessarily by using a competitive tender.

Clearly the New Zealand Government has adopted a broad whole-of-life cost and quality approach to this concept (which accords with the government's international trade obligations).

The OAG guidelines note (at page 13) that the government expects its departments to conduct all their procurement within the framework of the policy principles set out in the MED Guidelines. (The OAG Guidelines, by contrast, tend to focus on the practicalities associated with the selection of purchasing methods.) The MED policy principles are summarised as follows:

  • value for money over whole-of-life
  • open and effective competition
  • full and fair opportunity for all eligible suppliers
  • improving business capability, including e-commerce capability
  • recognition of New Zealand's international trade obligations and interests, and
  • requiring sustainably produced goods or services whenever possible, having regard to economic, environmental, and social impacts over their life cycle.

Impact of international trade obligations

Some, but by no means all, of the free trade agreements (FTAs) to which New Zealand is a party contain mutual commitments to conduct government procurement in accordance with the principles of transparency, value for money, open competition, due process and non-discrimination. Examples are the "P4" Agreement with Brunei Darussalam, Chile and Singapore (which is the foundation for the expanded Trans-Pacific Partnership negotiations also involving the United States, Malaysia, Vietnam, Australia and Peru), and the recently signed Closer Economic Partnership Agreement with Hong Kong.

However, other New Zealand FTAs, such as those with China and the ASEAN countries, do not include a government procurement chapter. New Zealand is also not a party to the WTO Government Procurement Agreement, though it is an observer. Where government procurement obligations apply, government tendering authorities cannot usually specify or prefer local content or otherwise favour local suppliers in a discriminatory fashion.

It is worth noting that the awarding of a contract to a non-New Zealand supplier does not necessarily mean the loss of local jobs. A look at the international companies already in New Zealand shows that many source their workforce locally and grow their business, creating further local employment.

Assessing commercial and practical advantages

Our FTA commitments do not preclude the commercial and practical advantages of buying locally produced goods and services from being included in the overall "value for money" assessment of a tender.

The MED Guidelines explicitly identify these potential benefits (at page 8) as follows:

  • a better price and total or whole-of-life ownership cost
  • better through-life support (e.g. better availability of spare parts and after sales service)
  • shorter supply lines and/or delivery lead times
  • reduced inventory costs
  • reduction or elimination of exchange rate risks
  • easier and cheaper communications/transport
  • simpler and cheaper contract administration and dispute resolution
  • greater scope for co-operative and innovative product development and influence over the supply base
  • continuity of supply and more direct control over orders
  • goods/services better adapted to local conditions, and
  • better knowledge of the producer's reputation and reliability.

The extent to which local supply can be given due weighting through the value for money analysis is best summarised in the MED Guidelines (at page 8) where they state:

In general, it will often make good business sense, in terms of value for money and a reliable supplier base, that goods and services should be sourced from local suppliers where the necessary standards of competitiveness, quality and availability are met.

The Government's procurement policy does not give preference or weighting to local content in itself. Similarly, there should be no discrimination on the basis of ownership of a supplier or preference for domestic equity in itself. Having given domestic suppliers full and fair opportunity and assessed any commercial and practical value for money advantages associated with local supply, agencies should buy from the best source available, according to their own judgement of all costs and benefits.

Other initiatives

The MED is developing a number of initiatives to improve the procurement process, some of which will have the effect of allowing smaller New Zealand suppliers to either band together to form consortia or to participate as subcontractors in a tender led by an international supplier.

Examples include:

  • adding a section to the Government Electronic Tenders Service (GETS) which will allow suppliers to express their interest in participating in a tender before the official Request for Proposal is announced
  • pushing total cost of ownership as part of good procurement practice, and
  • building competency in this area by putting procurement on the immigration skills shortage list.

Our thanks to Siobhan Hale for writing this Brief Counsel. For further information, please contact the lawyers featured as authors.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions