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2.4 Unincorporated Organisations

Purchasers should exercise care in dealing with an unincorporated organisation, as it will lack the legal capacity to contract. In addition, the individuals involved in the organisation may face personal liability for its activities. In some cases one or more parties to an unincorporated organisation may themselves be incorporated (e.g. in the case of a joint venture) and it may be possible to contract with them. There may also be an umbrella organisation that can be contracted with rather than the unincorporated organisation.

2.5 Tendering or Not?

Tendering should be an important part of a Government agency’s contract management system. Tendering involves inviting people to submit a bid to deliver the good or service that the purchaser wants. Government agencies should develop clear criteria for determining when it is appropriate to tender for services rather than using one of the other approaches listed at the beginning of this chapter. Tendering might not be necessary where:

  • The supplier has specialist expertise.
  • There is only one supplier (this should be periodically tested).
  • The service is relatively low cost, and the costs of tendering clearly outweigh the benefits.
  • The service has been recently tendered for.
  • The service fits with another service already provided by one supplier (the bundle of services as a whole may subsequently be put up for tender).
  • There is not time to tender (e.g. an emergency). This might happen, for example, where a contract for an essential service has to be terminated at short notice. Poor planning, by itself, is a poor excuse for not tendering.

Tendering offers a number of significant advantages. It:

  • Establishes the most competitive price and terms available.
  • Provides fairness between potential suppliers.
  • Reduces the risk of allegations of purchaser bias or political interference.
  • Can develop the market for services.
  • May bring forward innovative solutions.

On the other hand it does have certain disadvantages:

  • It can impose significant costs on the purchaser and the bidders, which can exceed its benefits.
  • Potential providers that lack experience or capability in tendering (especially small providers) may be disadvantaged by this process. It is therefore important to have a transparent and robust process for managing tenders, and to clearly communicate expectations about tendering to potential providers. This is further discussed below in Section 2.6.
  • Existing relationships may be prejudiced (including encouraging competition between organisations in the tender that will be expected to co-operate with each other in the future. This may be ameliorated, to some extent, by consultation with potential providers before the tender process, by encouraging collaboration between NGOs, and by accepting tenders from joint ventures. Care must be exercised to avoid breaching the Commerce Act).
  • It can take a significant amount of time.
  • It can expose the purchaser to the risk of litigation if it is mismanaged.

Quality as well as price will be an important consideration in terms of accepting a bid. For example, if many of the users of a service are Maori or Pacific Island peoples, it will often be important to ensure that an NGO is able to deliver the service in a culturally appropriate manner. A very low price in a bid may raise questions about the capacity of the organisation submitting the tender to deliver the service to the necessary quality.

It is important to be clear that a tender for a particular service is not a general funding round, so as to not encourage NGOs to send in inappropriate bids, regardless of their capacity to deliver. This places significant costs on both the NGOs and the Government agencies, and can raise unrealistic expectations.

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