COVID 19: Government contract guidelines to support industry

Government has implemented the first action from the Accord’s Construction Sector Response Plan and issued guidance and expectations to agencies on managing contracts during the shutdown.

The government recognises agencies working with the construction industry have a strong part to play in ensuring the industry remains viable and can bounce back after COVID-19 restrictions are lifted.

Ministers are directing agencies within their portfolios to follow new guidelines that will ensure cash keeps flowing in the sector to maintain businesses and jobs during the shutdown. The directive is being sent to the chief executives of all agencies engaged in construction and infrastructure projects including ministries, state-owned enterprises, district health boards and tertiary education institutions.

The construction industry is particularly vulnerable at this time due to its dependence on global supply chains and heavy reliance on cash-flow.
The guidance, which was developed by Accord Steering Group members and is supported by Building and Construction Minister Jenny Salesa, focuses on creating a consistent and supportive approach to contracts.

"By taking a fair and consistent approach across Government in how we deal with thousands of contracts and hundreds of firms, we can provide the best possible chance to this industry of weathering the damaging economic impacts of the current lockdown period," says Minister Salesa.

One of the central points in the guidance is that agencies should continue construction work that can be done off-site such as procurement, planning and design. Government is creating flexibility in the procurement rules to allow swift procurement work to be undertaken where necessary.

For projects that are stalled due to the shutdown, government is urging agencies to take a fair and consistent approach to contract management. Some agencies have already taken a lead on this including the NZ Transport Agency and Kāinga Ora – Homes and Communities – and the Accord has built on their approaches to create government-wide commercial guidelines.

The guidelines make it clear to agencies that because the government's response to COVID-19 has resulted in an effective change in law, this allows the possibility of extra costs incurred by contractors during the lockdown to be treated as a variation to the contract.

Agencies are also required to do what they can to support the financial viability of contractors and help them to retain their workers, which will in turn ensure they are able to deliver on their contracts once restrictions are lifted. Finally agencies are asked to consider whether additional financial relief for contractors is warranted and in the public good, and if so they should raise this with MBIE or Treasury.

Minister Salesa says the guidelines are well aligned with Accord principles of build trusting relationships, being bold, valuing our people and acting with collective responsibility.

"These principles apply to how we should work together right now. In practice, this means reaching out to contractors to support them in these challenging times. We need to understand what they're up against – and be sincere in working alongside them until we get to the other side of COVID-19".

Read the new guidelines for procuring agencies [PDF, 527 KB].