Procurement Law and the Health & Safety Legislation

John Rooney, Partner Charlotte Fox, Senior Associate

Chartered Institute of Procurement and Supply

26543038

Tender Law - A Recap • Recap

– “Two Contract” approach accepted by Courts in NZ – where circumstances allow

• Tender Contract: The submission of a tender constitutes a preliminary “tender contract” between the Principal and Tenderer(s) in relation to the tender process, prior to the primary contract being awarded

• Primary Contract: The acceptance of a tender concludes a binding contract between the Principal and the successful Tenderer

– Tender contracts protect tenderers from unfair conduct by the Principal

– “Tender Conditions” are “Conditions of Contract” and must be followed – you could be in breach if you do anything that is not envisaged or allowed by the Tender Conditions

Tender Law – Contracting Out • You can contract out

• Onyx v Auckland City Council case provides a good example of a Principal’s ability to contract out. In this case the RFT contained this clause:

“No legal or other obligations shall arise between the Tenderer and the Principal in relation to the conduct or outcome of the tender process unless and until that Tenderer has received written notification of the acceptance of its Tender”

• Courts upheld the above clause and found any “implied” duty to act fairly and even-handedly cannot override express terms in the RFT

Problem Gambling: Background

• Ministry issued an RFP seeking providers of public health and gambling services

• Problem Gambling Foundation submitted a tender

– Largest incumbent provider

– Largely unsuccessful and only received two small contracts

• Applied for Judicial Review of the Ministry’s decision

Problem Gambling – Judicial Review Grounds

• Ministry submitted that decision was only reviewable on basis of conflict of interest or apparent bias

– Reliance on Lab Tests case

• Court: Distinguished Lab Tests:

– Ministry was guided by Gambling Act 2003 as to what was required to develop, manage and implement an “integrated problem gambling strategy” whereas DHB had minimal statutory guidance

– Gambling Act did not prescribe how the strategy should be implemented whereas DHB required to act in a commercially viable manner

Problem Gambling: Ground One

Breach of Mandatory Rules of Procurement by Departments

• Binding and enforceable, prescriptive in nature

• Greater legal force than voluntary guidelines

• Rules require the Ministry to follow a notification process if they change the evaluation criteria. This did not occur:

– Ministry failed to follow evaluation criteria and weightings

– Use of a moderation process (to discuss and adjust rankings following formal scoring) was a material change

• Court held: Changes were not notified as required under the Rules

Problem Gambling: Ground Two

Evaluation Methodology Flawed

• Problem Gambling submitted expert evidence to show material errors in scoring and evaluation process

• Ministry argued that global assessment of each respondent was sufficient

• Court held: evaluation methodology was flawed because of cumulative errors in the scoring that formed the baseline

Problem Gambling: Ground Three

Panel Members Apparent Bias or Conflict of Interest

• Rule 14 Rules require departments to “eliminate” any potential conflict of interest

• Rule 43 Rules – “guarantee fairness and impartiality in the tender process”

• Court held: Applying these standards there was apparent bias:

– many panel members had knowledge about organisations submitting proposals

– many panel members had current or previous working relationship with tenderers

Problem Gambling – What does it mean for me?

• Courts will set aside decisions that do not comply with:

– Mandatory Rules

– Terms of the RFP

• Need to be careful about what is in RFP and Procurement Documents and ensure you do what you say you will

Update on the Construction Contracts Act

• Amendments to the Construction Contracts Act 2002

– Main amendments meant to come into force on 1 July 2015

– Inclusion of design, engineering or quantity surveying work applies to all contracts entered into or renewed after 31 March 2016

– Retention amendments due to come into force on 31 March 2016

Design & Engineering Work • Proposed section 6(1A) of the CCA:

(1A) Construction work includes-

(a) design or engineering work carried out in New Zealand in respect of work of the kind referred to in subsection (1)(a) to (d) and (f);

(b) quantity surveying work carried out in New Zealand in respect of work of the kind referred to in subsection (1)(a) to (g).

• Unclear if this includes Project Managers and Engineer to Contract

Design & Engineering Work cont.

Australian Position

• Security for Payment Acts apply to design, surveying and engineering related to construction work

• No definition of “architectural” or “engineering”

• Courts in Australia have held that when interpreting the Act a natural interpretation of the definition was preferred over a liberal one

• Arguable that administration work undertaken by an engineer is a “natural” part of role of Engineer on a construction project

Design & Engineering Work cont.

UK Position

• Housing Grants Construction and Regeneration Act 1996 – applies to architectural, surveying work and “advice on building engineering”

• UK case law indicates that the role of Engineer to the Contract may be included within the term "engineering work" for the purposes of the HGCRA

Retentions

• Retention money defined as:

“…an amount withheld by a party to a construction contract (party A) from an amount payable to another party to the contract (party B) as security for the performance of party B’s obligations under the contract.”

• Proposal for retention money to be held on trust by Party A for the benefit of Party B

• Money not available for the payment of any debts of Party A other than to pay Party B

Retentions cont.

• Adequate accounting records must be kept

• Party A may invest the money and keep the return, but must make good any shortfall

• Money may be kept in a mixed account with Party A’s own money

Any questions?

Health and Safety Reforms

Overview

• Significant reforms

• Key changes

• Due diligence obligations

• Management responsibilities

Change in NZ

• Pike River – Royal Commission

• Independent Task Force – Key findings and recommendations to Government

• WorkSafe NZ – New regulator

– Sole focus on Health and Safety

• Health and Safety Reform Bill – Overhaul of the law

Key Changes

Officers – who are they and what will their obligations be

Workplace – definition and how

far it reaches

Duties for overlapping PCBU

Scope of primary duty of care for

PCBUs

Duties owed to and by volunteers

Requirements for worker

participation and engagement

PCBU Person conducting a business or

undertaking

Meaning of PCBU

• Catch-all for work/business

• Move away from employer/employee centric focus

• Reflects new ways of doing business

• Excludes officers and workers

• Excludes volunteer associations and an occupier of a home

PCBU – big shift

• PCBU multiplies, not divides, the responsibility

• The term ‘PCBU’ is like a fishing net - it catches as much as it can in work/business places

• Not just employers who hold responsibility anymore

Duties of PCBUs

• Primary duty of care is to ensure so far as is reasonably practicable the health and safety of

– workers employed or engaged or caused to be employed or engaged who work for the PCBU while the workers are at work

– workers whose activities are influenced or directed by the PCBU, while the workers are carrying out the work

PCBU must consult with other PCBUs with same duty • Overlapping duties

• Where more than 1 PCBU has a duty for the same matter

• So far as is reasonably practicable, – consult,

– co-operate with, and

– co-ordinate

activities with all other PCBUs who have a duty in relation to the same matter

Officer

Royal Commission on the Pike River Coal Mine Tragedy

• The Royal Commission reached the following conclusions about Pike River’s corporate governance: – The Board's focus on meeting production targets set the tone

for executive managers and their subordinates – The Board needed to satisfy itself that executive managers were

ensuring workers were being protected – An alert Board would have ensured that these things had been

done properly – The Chairman's attitude was that things were under control

unless told otherwise

Definition of officer • Scope of definition clarified – moved away from Australian

definition

• Now officer duties only apply to those: – in senior governance roles

– with the ability to exercise significant influence over the management of the business or undertaking, eg a Chief Executive

• Makes clear duties will not apply to those who merely advise or make recommendations

Meaning of Officer Officer, in relation to a PCBU:

(a) means, if the PCBU is-

(i) a company, any person occupying the position of a director of the company by whatever name called:

(ii) a partnership (other than a limited partnership), any partner:

(iii) a limited partnership, any general partner:

(iv) a body corporate or unincorporated body, other than a company, partnership, or limited partnership, any person occupying a position in the body that is comparable with that of a director of a company:

(b) includes any other person, who makes decisions that affect the whole, or a

substantial part, of the business of the PCBU occupying a position in relation to the business or undertaking that allows the person to exercise significant influence over the management of the business or undertaking (for example, the chief executive officer): but

(c) does not include a Minister of the Crown acting in that capacity (d) to avoid doubt, does not include a person who merely advises or makes

recommendations to a person referred to in paragraph (a) or (b).

Due Diligence Obligations (clause 39)

1. Keep up-to-date with health and safety matters

2. Ensure the person running the business has

appropriate resources and processes to manage risks to health and safety

3. Understand the nature of the business and its

hazards and risks

4. Ensure there are appropriate reporting

and investigation processes in place

5. Put in place monitoring regimes to ensure that the above matters are effective

6. Verify

What needs to be done to support good governance?

Management responsibilities

Workplace

Definition of workplace

(clause 15)

(b) includes any place where a worker goes, or is likely to be, while at work.

(a) means a place where work is being carried out or is customarily carried out for a business or undertaking; and

a workplace—

Workplace cont’d

• Some areas will not be workplaces all the time and once work is carried out in a place, it does not stay a workplace indefinitely – eg work on a powerpole

– work “customarily” carried out in a workshop

• Addresses farmers’ concerns regarding their duties toward recreational walkers

• But – what about users of grounds for recreation or leisure?

Volunteers

PCBU has duty to volunteer workers if they

• carry out work, in any capacity, for a PCBU

– with the PCBU’s knowledge or consent

– on an ongoing and regular basis

– that is an integral part of the business or undertaking

(clause 14(3))

But not if….

• The volunteer: – participates in fundraising activities

– assists an educational institute, sports club or recreation club with sports or recreation

– assists with activities for an educational institute

– care for other people in the volunteer’s home

(clause 14(3))

Volunteer workers

• Coverage of volunteers remains the same as under current health and safety law (distinguishes between casual volunteers and volunteer workers)

• Casual volunteers still covered by PCBU duty to ensure health and safety of other persons affected by business or undertaking

Worker engagement and participation

Key messages from WorkSafe

• ACOP with targeted consultation groups

• Intention of Bill is for PCBUs to lead change around encouraging worker voice

• Bill deliberately does not prescribe specific practices

• PCBUs should be innovative and flexible with worker participation practices

Health and Safety representatives

• H&S representatives are elected by workers (clause 65)

• Functions (schedule 1A)

- represent workers and promote their interests

- monitor actions taken by PCBU

• Broad powers (schedule 1A clauses 2-8)

Election of representatives

• Worker can notify if s/he wants a health and safety representative appointed

• If a PCBU is notified it must initiate the election of one or more health and safety representatives

Election of representatives cont’d

• PCBU is not required to initiate the election of a health and safety representative, if the work of the PCBU

- is carried out by fewer than 20 workers; and

- is not within the scope of any prescribed high-risk sector or industry

• Similar provisions apply in relation to health and safety committees

Worker engagement and participation

• Provides flexibility for small, low-risk businesses

• All PCBUs are still required to engage with workers and ensure there are appropriate ways for workers to participate in health and safety matters

• Have these changes “watered down” the Bill?

Conclusion

• Need to establish who performs duties for the PCBU:

– Who are the officers?

– Who are workers?

– What are the PCBUs we have to consult, co-operate and co-ordinate with?

• Ensure there are effective procedures in place

• Keep on top of reporting

Key Messages

• Major overhaul

• Take time to understand the changes

• Be prepared

• Action needs to be taken

Any questions?

Simpson Grierson Team

John Rooney Charlotte Fox

Partner Senior Associate

DDI: +64 9 977 5070 john.rooney@simpsongrierson.com

DDI: +64 3 968 4015 charlotte.fox@simpsongrierson.com