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Rule 46:
Awarding the contract

Explains when and how an agency should award a contract.

  1. An agency must, unless there is a legitimate reason to cancel the procurement, award the contract to the supplier/s that has both:
    1. demonstrated that it fully understands and has the capability to deliver the requirements and meet the contract conditions, and 
    2. offered the best public value including broader outcomes, over the whole life of the goods, services or works.
  2. If a supplier offers a price that is substantially lower than other responses (an abnormally low bid), an agency may seek to verify with the supplier that the supplier is capable of both:
    1. satisfying all of the conditions for participation, if any, and
    2. fully delivering all of the contract requirements (eg quality, quantity, time and location), any other stated objectives,  and meeting all of the contract conditions for the price quoted.
  3. An agency must not cancel a procurement, use options, or modify or terminate an awarded contract to avoid applying the Rules.

Examples of reasons to cancel a procurement

A legitimate reason to cancel a procurement could include:

  • a change of policy
  • a change to an appropriation that affects funding for the initiative
  • no supplier has offered a satisfactory solution or an acceptable price, or one that represents public value
  • a Ministerial direction.

Public value

To determine which supplier offers the best public value, consider all the relevant information from your evaluation process, due diligence and reference checks, and any broader outcomes that could be leveraged through your procurement.

Look out for abnormally low bids. An abnormally low bid may reflect a more efficient supplier or one that is willing to make an investment in the relationship by taking a lower margin on the contract. Such competitive responses should be encouraged. But an abnormally low bid could impact negatively on service delivery. It could even indicate that the supplier is involved in a cartel or taking advantage of its market power in breach of section 36 of the Commerce Act 1986(external link).

For more information, How to recognise and deter bid rigging [PDF, 1MB](external link) from the Commerce Commssion New Zealand website.

Conducting due diligence

Before awarding a contract, you need to conduct due diligence. This ensures, among other things, that suppliers are who they claim to be, are financially sound, and have the necessary capacity and capability to deliver the needs of an agency. Due diligence should also continue throughout contract delivery. More guidance on due diligence is on the templates page.

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