Following these basic buying principles can help schools to get better value for money.
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It is strongly advised that schools follow these buying basics, to allow more money and time to be spent directly on students’ education.
Schools receive limited operational funding from the government. This operational funding is the money that the school board receives to achieve educational outcomes and cover the costs of day-to-day running. Therefore, it is important that every dollar spent on buying goods and services delivers maximum value.
By making smart buying decisions, schools can save substantial amounts of money. This money can then be used elsewhere, to focus on generating educational outcomes.
School staff, including principals, will also spend less time making buying decisions when buying is done smartly. This saved time can then be spent with students.
All state and state-integrated schools are funded by public money and the school board has ultimate accountability for how this money is spent. The board may however delegate buying responsibilities to, for example, the principal or executive officer/business manager/administrator or equivalent.
All staff responsible for buying in schools must make responsible buying decisions, showing probity and financial prudence.
Spending should always be used on causes that contribute to generating positive educational outcomes.
Before making a purchase, it should be asked:
- can the spend be justified from the public’s perspective?
- how would the purchase look in an audit?
All money received by a school, whatever the source, is public money and should be spent following the principles above. This includes funding from The Ministry and from all other sources, such as fundraising events or international student fees.
New Zealand Government Procurement Rules
Schools are expected to have regard to the Government Procurement Rules as good practice guidance. These rules guide the public sector to procure responsibly and achieve public value.
This includes following the Five Principles of Government Procurement.
- Effectively plan and manage the buying process.
- Be fair to all suppliers.
- Buy from the best supplier.
- Consider public value when buying.
- Act responsibly, lawfully and with integrity.
To ensure that the best public value is being achieved, public money must always be spent responsibly.
The concept of public value also recognises the potential for the spending of public money on goods and services to contribute to achieving broader social, economic, environmental and cultural outcomes. These broader outcomes deliver long-term public value for New Zealand.
To contribute to achieving broader outcomes, schools should consider how their spending can support suppliers who are:
- reducing their emissions and waste
- New Zealand suppliers (including Māori suppliers and Pasifika suppliers)
- using good employment practices
- offering innovative ways of meeting their customers’ requirements.
Keep track of spending
Monitoring school accounts will help to ensure that all outgoing costs are explainable and manageable.
Any extraordinary spending can then be identified and, if required, prevented from happening in the future.
Regular high-spend areas can also be identified. Typically, a handful of spend categories or contracts will account for the majority of spending. These are the areas where a school has the most potential to achieve savings.
Find opportunities to reduce spending
Rationalising purchasing where possible is a simple way of making savings.
Are any goods or services being purchased that are:
- going unused?
- costing more than can be justified by their use?
- not contributing to educational outcomes?
- also offered by another current supplier to the school, who may provide a consolidation benefit if purchased from them?
If so, it is worth re-considering the purchase.
Focus on whole-of-life costs
Whole-of-life cost is a concept used to judge the full price that is paid for goods or services. Often, an item’s immediate purchase price is not the full amount that its buyer will spend on it.
When buying vehicles, whole-of-life cost is called the Total Cost of Ownership (TCO) and incorporates factors such as fuel efficiency and maintenance.
It is always smart to look beyond the immediate cost of a purchase and consider all associated costs that will be faced in the future. Examples of future costs include:
- Maintenance costs
- Support costs (e.g. for software)
- Utilities/energy costs
- Environmental costs
- Termination costs
Consider a contract’s risks
Risk is the potential for something to go wrong.
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The risk of your school facing unexpected costs.
Example: Your school is on a variable pricing plan for electricity, where the supplier can change rates with 30 days’ notice. In the future, your school might be required to pay an irregularly high price for electricity, based on changes in the electricity market.
Business continuity risk
The risk of the supplier ceasing operations and leaving your school in a difficult position.
Example: A painting supplier ceases to trade, leaving your school half-painted for an extended period.
The risk of something going wrong in the day-to-day operation of the contract.
Example: A cleaning supplier forgets to lock your school’s buildings.
The risk of your school getting a negative reputation because of the actions of your supplier.
Example: Your waste management supplier is found to be incorrectly disposing of rubbish and harming the environment.
Risks should be considered prior to awarding a contract (through due diligence) and then managed during the life of the contract.
The likelihood of problems actually occurring and the seriousness of those potential problems will vary between contracts. These variables should always be considered when evaluating offers made by suppliers.
Review contracts regularly
Establishing a system for managing contracts helps to ensure that no surprises arise.
By staying on-top of contracts, schools can always approach suppliers prepared and therefore achieve good value in purchases.
It also prevents urgent buying tasks from arising unexpectedly at inconvenient times.
Staying on-top of crucial contract information is made easier by using a contract register.
Use collaborative contracts when possible
Schools can join collaborative contracts to benefit from the buying power of the government’s collective spending.
Through collaborative contracts, schools can save both time and money, while also reducing risk.
Find out which goods and services are covered by collaborative contracts.
Test the market regularly
When a contract is approaching expiry, it is always a good idea to test the market.
Even if schools expect to renew an existing contract, it is important to check what other suppliers can offer, before signing an extension. The market may have changed since the original contract was signed and it may no longer be the best offer available.
To test the market, begin the buying process for the good or service and make contact with suppliers to obtain their offers. Until a contract is signed, all contact with suppliers is on a non-commitment basis.
To learn how to begin the buying process, see the links below.
Collaborate with other local schools when possible
Even when not joining a collaborative contract, it is smart for schools to approach the market as a group (if possible). This also applies to buying categories where no collaborative contracts exist.
If two or more schools are purchasing the same or similar goods or services, the offers made to the group by suppliers are likely to present greater value than those offered to an individual school.
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