New Zealand: Rules of commercial engagement with government

Brief Counsel

The Auditor-General's inquiry into the process behind the selection of SkyCity to build the international convention centre provides a useful contextual guide to the rules of engagement when dealing commercially with government.

This applies not just to procurement processes but also to contestable funding applications. We discuss some of the key take-outs.


The main question before the (deputy) Auditor-General was whether the Government's decision to negotiate with SkyCity was influenced by "inappropriate considerations, such as connections between political and business leaders".

The inquiry found no evidence of impropriety on these grounds but did find a range of procedural problems and deficiencies the effect of which was to compromise the fairness and credibility of the engagement.

In particular, it found that the call for Expressions of Interest (EOI) was poorly planned and executed with the result that one submitter was treated differently from the rest during the evaluation process.

The Auditor-General's analysis and conclusions provide a useful refresher guide both to government agencies and to parties engaging with them on how procurement processes should be run.


Participants in a procurement process – whether an EOI or a Request for Proposal (RFP) – should be able to expect:

  • the same, full information on the Government's requirements and how the process will run, and
  • equal treatment (this does not mean that everyone needs to be treated identically but it does mean that they should have the same broad opportunities to receive and provide information).

No RFP was issued in this case but the EOI request and associated process failed both of these expectations.

Tender documents must be as clear and unambiguous as possible

The EOI document was muddled and merged different objectives. It tried to do three things at once: to elicit general ideas about how New Zealand might attract more business events, to test interest in building a new international-standard centre and to explore whether there were any plans to expand existing facilities around the country.

It also failed to set out how the proposals would be evaluated and what criteria would be applied. And, although it contained a clause reserving the Government's right to negotiate with a single submitter, it provided no explanation of why and how such a decision would be taken.

The playing field should be level

More importantly, the EOI was not clear that the Government's preference was to put no money into the project. Instead submitters were asked to provide creative suggestions on how it could be funded, including "central government, local government and private sector funding options". And the main background information provided was a feasibility study which included a conclusion that central government would meet some or all of the capital costs.

"This context, combined with the fact that the Government was using a procurement process to approach the market, all supported an impression that government funding was likely to be part of the eventual solution.

"Yet SkyCity knew...that the Government did not want to fund the construction of a convention centre at all and would look at alternative ways of making a centre viable, including regulatory reform to provide a potential provider with an enhanced revenue stream."

The result was that "one potential submitter had a clearer understanding of the actual position on a critical issue" than any other potential submitters.

The Auditor-General doubted that the failure to disclose the Government's reluctance to put up any cash made a material difference as it was widely known that the Government's finances were constrained and it was unlikely that any other submitter would have been able to adapt their proposal so that they carried the full construction costs.

But the omission was "symptomatic of the lack of attention to procedural risks".

Direct engagement with Ministers.... fine in the preliminary stages.

"We have no concern that the Government took steps to find out whether SkyCity's development plans might be relevant to the discussions about an international convention centre. Nor is it unusual for a company like SkyCity to approach government officials and Ministers to explore whether there might be government interest in, and support for, its development ideas....

"Our investigation confirmed that the discussions between August 2009 and March 2010 remained high level and preliminary in nature."

However, once a formal approach has been made to the market (through an EOI or RFP) all communications with submitters needed to be carefully managed.

Forward planning is essential

The Government had made no commitment to proceed to a formal RFP when the EOI request was issued. It was fully entitled to proceed one step at a time, but it is essential to always be thinking ahead.

"The decision to proceed to an EOI process should have been accompanied by systematic planning on next steps and what was needed to manage any risks."

This was particularly so after SkyCity had made it clear that it would need regulatory reform to make the centre viable as it was apparent at this stage that any further discussion would effectively be a commercial negotiation about an exchange of value to achieve the desired outcome.

Against this backdrop, Ministers and negotiating officials needed to be well-briefed on the procedures which should be followed – the general principles which needed to underpin the process, the relevance of the Mandatory Rules for Procurement by Departments (which, as the name indicates, are binding), the limited exceptions in those rules, and the procedural steps the Government would need to follow if it was considering proceeding to direct negotiations with SkyCity.

Maintaining competitive tension

The usual way to maintain competitive tension while exploring one or more of the EOI responses in detail is to proceed to a full RFP. Where the costs this will impose on participants is not justified (perhaps because there really is only one contender) and the purchaser enters direct discussions with one party, other mechanisms can be used to manage the value-for-money aspect in the absence of a competing bid.

There is a growing amount of guidance available on alternative negotiation techniques to manage this type of situation.

What to be aware of when dealing with the Crown for funding or as a supplier

For those wanting to provide goods or services to the Crown or receive funding, the basic principles that govern all public spending are: accountability, openness and transparency, value for money, lawfulness, fairness and integrity. These apply regardless of the value or complexity of the arrangement.

Although the principles do not bind the private sector, suppliers or funding applicants can be affected by association with a deficient process through reputational damage, wasted expenditure on pitching and planning, and delay – all of which can come with a cost.

For public sector procurement of goods and services over $100,000, further considerations apply.

  • The reach of the Mandatory Rules on Procurement extends beyond their statutory jurisdiction as many public sector agencies which are not bound by the Rules choose to apply them anyway as part of their own procurement policies.
  • The Rules require central Government to use a tender process to test the market, unless one of the limited exceptions applies. Usually the Government will have to go through an RFP stage, even if it has issued an EOI.
  • Where there is no "off the shelf" process for making complex decisions (such as a testing of market, commercial negotiation and policy and political decisions), the Government will still need to follow the basic procurement principles – and document that it has done so.
  • Different principles may govern different stages of a procurement process, so potential participants should understand which apply.
  • If responding to an EOI, look for the evaluation process and evaluation criteria. If they're not there, ask for them, especially if the Government reserves the right to negotiate directly with one submitter as a result of the EOI.
  • All potential submitters for an EOI are entitled to have the same time and information to prepare and submit responses. No submitter should have more opportunity than another to improve its proposal based on post-submission feedback to its response.

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