Consultation on refreshed Government Model Contract templates

• View the templates on the New Zealand Government Procurement website(external link)

Many thanks to those who made submissions and suggested improvements to the draft templates.  We received 34 submissions from a mix of suppliers and government agencies.  A summary of the submissions and our analysis is below. 

Government agencies may start to use the new templates now and must use them for all new eligible contracts for lower value, low risk contracts from 1 June 2020.   These contract templates are not intended for construction, ICT or social services related contracts because they are generally not low risk or lower value.   If you have any questions about the consultation or the new templates please email procurement@mbie.govt.nz.

Summary of submissions and consequential changes to the Government Model Contract templates

The Ministry of Business Innovation and Employment asked for feedback on changes to update and refresh the Government Model Contract templates.

The proposed changes

The templates are for lower value, low risk contracts.  They save effort, improve consistency and reduce legal costs for government and contracting partners and make it easier for Suppliers to do business with government. 

The Government Model Contract templates are being refreshed to ensure they are up-to-date with current Procurement Rules, and new elements such as broader outcomes.

We sought feedback on 11 refreshed templates and the following main points:

• a new clause to reflect the Health and Safety at Work Act
• a new clause on the Supplier’s obligations to meet employment standards
• a new clause to refer to the Supplier Code of Conduct
• whether the refreshes provide the standard, simple, plain English set of conditions that are needed.

We received 34 submissions from a mix of suppliers and government agencies. Thank you to everyone who gave us their valuable feedback. We really appreciated the time and attention to detail you gave.

The submissions covered a range of topics as outlined below.  There were few comments about the format of the templates.  We are taking that to mean that the new look is a welcome improvement.  There were few comments on the variation templates or the “lite” contract template.  The comments below are about the two standard contract templates, the services contract templates and the goods contract templates.

When the templates should be used

Several submitters asked us to emphasise that the templates are not suitable for construction related services or ICT goods and services.  We agree and have restated this in our guidance on the templates. 

Page 1 (the front sheet) and Schedule 1

We have renamed Page 1 to ’the Contract details section‘ to address the problems of references to ’Page 1‘ or to ’this page‘ when that section usually goes over more than one page.  Similarly Schedule 1 is now renamed ‘Description of Services’.

NZBN

We had some submissions which pointed out that not every Supplier will have an NZBN.  It is government policy to implement the NZBN across government, including in contracts with Suppliers. As a result, MBIE expects government agencies to ask Suppliers to provide their NZBN and to get an NZBN if they do not have one.

Getting an NZBN is easy. Having and using an NZBN offers a business considerable benefits, including being accurately identified, keeping up-to-date with other businesses and helping prepare for e-Invoicing. Find out how to get and use an NZBN at nzbn.govt.nz(external link).

Approved Personnel

We have retained the option to name ’Approved Personnel’.  There was a submission that it is unreasonable for government to specify who will deliver services.  We concluded that there are occasions when a particular person is important to the services purchased.  However, in the guidance for this clause we have added further clarification that this should only be used where specific personnel are required.

Address for invoices

In response to a submission querying the need for multiple addresses for invoices we have simplified this table for Parties to insert the relevant address (whether physical, postal or email).

Proposed new clauses

Several submitters proposed a new clause enabling renewal or extensions of contracts.   We have now inserted a new clause to that effect in Schedule 1 and Schedule 2.

We also received proposals for new clauses on:

• ’Children’s Services‘ as defined in the Vulnerable Children Act 2014
• a suspension clause
• a clause enabling audits, and
• a number of clauses relating to research contracts.

We concluded that these were either specific to the particular contract and could be inserted as additional clauses or were not suitable for low value, low risk services.  We have not adopted these proposals.

Supplier Code of Conduct

We received a small number of submissions about this clause.  They covered the following points:

• Was it intended to replace the previous reference to the Standards of Integrity and Conduct which are for the public service? The answer to that is yes.  The Standards of Integrity and Conduct are intended for public service employees and do not apply readily to Suppliers to government.
• There was a question about whether the reference to the Supplier Code of Conduct should be included as an obligatory term in the non-Crown version of the templates. As non-Crown agencies determine how to implement the Supplier Code of Conduct, we have amended the non-Crown templates to make this an optional clause.
• There were concerns that the Supplier Code of Conduct is vague and it is difficult for Suppliers to be certain what is required. We consider that the Code is clear about Government expectations and including the Code in the templates is important to its implementation.
• It was suggested that the ability to unilaterally impose amendments to the Supplier Code of Conduct was unreasonable. Given that these templates are for low risk/lower value contracts we agree and have removed that provision.

Charges and payment

We amended the timeframe for payment of invoices so that invoices received by the fifth Business day of the month must now be paid by the 20^th of that month.  The clause in the contract templates is a minimum standard which agencies must aim to exceed.

In December 2019, the Minister for Small Business announced a target for government departments to pay 95 per cent of domestic invoices in 10 business days by June 2020. 

Health, Safety and Security

There were a number of comments about the Health, Safety and Security clauses in the templates.  Some were about rebalancing the clause to better reflect the obligations in the law as between the contracting parties. 

We have amended these clauses to:

• make it clear that the Supplier is not required to manage the Buyer’s obligations under the Health and Safety at Work Act 2015
• limit their application to the contract
• refer to ‘notifiable injury, illness, incident or event’ to more accurately reflect the legislation, and
• include Protective Security requirements.

Specific reference to protective security was added to the templates to ensure that government agencies consider the Government’s Protective Security Requirements and their application to these contracts, including any reporting requirements.  See https://www.protectivesecurity.govt.nz/(external link).

Employment Standards clauses

Submissions on this clause included the following:

• it should be limited to behaviour relevant to the contract
• a request for confirmation that Subcontractors would also be covered
• some questions about the benefits of reporting breaches or investigations and concerns that this reporting might cause breaches of privacy or self-incrimination, and
• submissions that the reference to Personnel is inappropriate as employees have no, or limited, obligations or are acting as agents of the Supplier.

The inclusion of this clause in the templates reflects the priority Government places on good employment practices.  This has recently been confirmed through the Supplier Code of Conduct and the Rule 19 of the Government Procurement Rules: “Agencies should ensure their contracts set out the expectation that Suppliers and subcontractors comply with employment standards and health and safety requirements”.

It is Government policy to encourage good employment practices in all aspects of a business and not solely those engaged in a contract with a government agency.  Reporting of investigations and breaches is important to support this policy and to protect public confidence in government agencies and the Suppliers they work with.

There is an existing obligation on Suppliers to ensure that Subcontractors are bound by equivalent terms, so they do not need to be separately mentioned in this clause.  Suppliers remain responsible for any acts of omissions of the Subcontractor.

We have deleted references to ‘employees’ because where employees have responsibilities for employment standards because they are managers or supervisors, those employees will be acting as agents of the Supplier or Subcontractor. 

Termination

We received a number of submissions about the termination clauses.

The specific clause on termination for non-payment caused some confusion with at least one submitter suggesting that it was an attempt to limit a Supplier’s termination rights.  We deleted the clause on termination for non-payment, but the Buyer still may terminate for non-payment under the clause which enables a Party to terminate for breach of contract.

We have retained the right to terminate for any breach provided the defaulting party is given a chance to remedy.  We have also retained the clause which requires consent from the Buyer before the Supplier can terminate for convenience.  This is because the Buyer is reliant on the Supplier to provide the contracted services and it is reasonable that they cannot terminate unless there is a reason to do so.

We have retained the right to terminate for convenience.  We received a submission that this might enable impingement on academic freedoms in the case of contracts with educational institutions.  We suggest this can be dealt with by changes or additional clauses for those specific cases. 

We have not included a proposed new clause allowing suspension of the Contract as this is not consistent with a low value/low risk contract.

Intellectual Property

There were several submissions about the clauses on intellectual property (IP).   

One proposal was that New IP should remain the property of the Supplier.  Reference was made to Rule 63 of the Government Procurement Rules and the State Services Commission Guidelines for treatment of intellectual property rights in ICT contracts. 

Rule 63 does not require that all New IP remain with the Supplier.  It requires that agencies make clear their intentions for ownership of IP and take into account three guidelines on the topic.  As these templates are not for ICT contracts there is no inconsistency between the templates and the State Services Commission Guidelines.  The Cabinet Guidelines for intellectual property from Public Service research contracts states that departments have a right to own any IP resulting from research they commission.

A common position in a services contract is that the Buyer owns the IP that is created for it.  These templates maintain that position on behalf of government.  This does not preclude negotiation and changes for particular contracts where there is a justification for using a different approach.

Following submissions we have made a change to make it clear that any New IP that is not in the Deliverables (i.e. which is created by the Buyer in the course of creating the Deliverables or any new methodology or approach) is owned by the Party which creates it.  But where improvements to IP form part of the Deliverables they are owned by the Buyer.

We received some submissions concerned about the indemnity in clause 12.  We have deleted that provision because the Supplier warranty provides sufficient protection.  We have also changed the warranty to make it clear that it relates to expected uses of the IP only.

We have amended the license clause so that it is limited to the use of the Deliverables or as needed to receive the full use of the Deliverables. 

We have not made changes to:

• add an indemnity for the Supplier against infringement of IP by the Buyer, as the Supplier always has the option of enforcing its IP rights and the inclusion of this clause would result in legal and process issues for the majority of government users of the template, and
• the license which enables modification of IP and transfer of IP. The intention is that the owner of any New IP has those rights.  Specific concerns for research contracts can be dealt with by negotiation and additional clauses or changes. 

Confidential information

In response to submissions we have strengthened the requirements around security of confidential information by inserting a new clause on security on that information.

We have also clarified that confidential information may be released if required by regulations, rules or policy that is binding on the parties.  This reflects submissions that there may be requirements, such as the Stock Exchange Rules or reporting requirements under the Government Procurement Rules, which are not legislative but are binding.

Under the definitions section we have stated that confidential information includes ‘data and personal information’ in response to submissions requesting that change.

Goods and services templates

There were several requests for a new template to cover goods and services.  This proposal will be included in future work. 

Definitions

Deliverables

Reference to ‘tangible’ deliverables has been deleted and examples of deliverables have been reinstated.

Protective Security Incident

We have added this definition in response to a submission from the Government Protective Security Lead.  See www.protectivesecurity.govt.nz(external link) for the Government’s Protective Security Requirements. 

Smaller changes

In this section we highlight smaller drafting changes as a result of consultation.

We have:

• created a separate box for the NZBN number in readiness for contract automation
• amended clause 2.3 to be clear that the Supplier is not responsible for delay caused by the Buyer
• changed the terms of payment to provide that invoices received by the 5^th (instead of the 3^rd) business day of the month will be paid by the 20^th of that month. This is consistent with the All of Government Contracts
• Changed “take out insurance” to “hold insurance” to recognise that Suppliers may already have the necessary insurance, and
• Changed “immediately” to “promptly” wherever it appears as it gives a flavour of “without delay” but recognises that immediately will not always be possible.

Errors in the templates

A number of errors in the text or format were identified.  Many thanks to those who gave such attention to detail.  These have been checked and where needed they have been adopted.

Next steps

We have now finalised the templates and they can be found on the Procurement website(external link). Government agencies will be required to use the templates for low value, low risk contracting from 1 June 2020.   

Before that time use of the templates is optional and we encourage all agencies to implement them as soon as practicable.  Current contracts do not need to be changed to the new templates.