Govt Proposes Overhaul of Procurement Rules to Boost Local Businesses

Economic Growth Minister Nicola Willis announced the proposed changes, emphasizing their potential to stimulate job creation and economic growth.

The New Zealand Government is set to reform procurement rules to make it easier for domestic businesses to secure government contracts, which collectively exceed $50 billion annually. Economic Growth Minister Nicola Willis announced the proposed changes, emphasizing their potential to stimulate job creation and economic growth.

Key Changes in Procurement Rules

Introduction of an Economic Benefit Test A significant feature of the reform is the introduction of an ‘economic benefit’ test. This measure mandates government agencies to consider the broader advantages of awarding contracts to New Zealand firms. The goal is to enhance export potential, generate employment, and foster business expansion within the country.

Reduction of Bureaucratic Hurdles To simplify the tendering process, the Government plans to cut 24 out of 71 existing procurement rules. These eliminations target redundant, duplicate, or unused regulations, thereby reducing complexity and paperwork. The move is expected to lower barriers for small and medium-sized enterprises (SMEs) competing for government contracts.

Removal of Specific Requirements

Among the scrapped requirements are:

• The mandate for non-residential government buildings to meet a five-star rating standard.
• Compulsory procurement of battery-electric or hybrid-electric vehicles.
• Requirements for office supplies to be low-waste and recyclable.
• The obligation to pay the living wage in government contracts for cleaning, catering, and security services.

Many of these provisions will be replaced by the overarching economic benefit rule, ensuring that procurement decisions prioritize national economic advantages rather than rigid compliance measures.

New Thresholds for Procurement Contracts

The proposed rule changes will apply to:

• All goods, services, and refurbishment contracts valued over $100,000.
• All construction projects exceeding $9 million.

For contracts below these thresholds, agencies are expected to prioritize capable New Zealand businesses when awarding contracts.

Public Consultation and Next Steps

The Government has opened a public consultation period on these draft rules, running until 8 April 2025. Following this, the proposed reforms will be reviewed by Cabinet for final approval.

Minister Willis reiterated the Government’s commitment to fostering a business-friendly environment where local companies can scale up and compete globally. By streamlining procurement processes and emphasizing economic benefits, these changes aim to create a more dynamic and prosperous New Zealand business landscape.